8-K

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): January 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. ☐

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Item 2.02	Results of Operations and Financial Condition

On January 28, 2021, First Northwest Bancorp issued an earnings release for the quarter ended December 31, 2020. 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 January 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 February 26, 2021, to shareholders of record as of the close of business on February 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 January 28, 2021
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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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:	February 3, 2021	/s/Matthew P. Deines
		Matthew P. Deines
		President and Chief Executive Officer

ex_223971.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 Record $3.8 Million, or $0.41 Per Diluted Share, in Fourth Quarter 2020 ****

and a Record $10.3 Million, or $1.10 Per Diluted Share, for the Year;

Results Highlight Net Interest Ma r gin Expansion and Substantial Loan and Core Deposit Growth

Declares Quarterly Cash Dividend of $ 0.06 Per Share

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Port Angeles, WA, (January 28, 2021) -- First Northwest Bancorp (Nasdaq: FNWB) (“Company”), the holding company for First Federal Savings and Loan Association of Port Angeles (“Bank” or "First Federal"), today reported net income increased 72.0% to $3.8 million, or $0.41 per diluted share, for the fourth quarter of 2020, compared to $2.2 million, or $0.23 per diluted share, for the fourth quarter a year ago, an increase of 3.8% compared to $3.7 million, or $0.40 per diluted share, for the third quarter of 2020. Fourth quarter results reflected strong loan and deposit growth, net interest margin expansion and improved efficiency. For the year 2020, net income increased 14.7% to a record $10.3 million, or $1.10 per diluted share, compared to $9.0 million, or $0.91 per diluted share, for 2019.

The Company also announced that its Board of Directors declared a regular quarterly cash dividend of $0.06 per common share outstanding, payable on February 26, 2021 to shareholders of record as of the close of business on February 12, 2021.

“First Northwest Bancorp produced record results for the fourth quarter and the year, with strong top line revenue growth, double digit loan and deposit growth and an improving net interest margin,” stated Matthew P. Deines, President and CEO. “Despite a difficult operating environment created by pandemic-related economic challenges, we made progress in several areas of the business, as we continued to support our customers, communities and employees.”

The sectors most heavily impacted by the pandemic include hospitality; restaurant and food services; and lessors of commercial real estate to these businesses. At December 31, 2020, the Company’s exposure as a percentage of the total loan portfolio to these industries was 4.44%, 0.17%, and 4.41%, respectively.

“We participated in the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) beginning in April and ending in August, 2020, assisting approximately 515 customers who received $32.2 million in PPP funding, and we are participating in the SBA’s new round of PPP funding that began earlier this month,” said Deines. “This next round of SBA funding offers new 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. Now more than ever, we are here for our customers and communities.”

“We were also successful participating in the Federal Reserve’s Main Street Lending Program,” said Deines. “As of year-end, we assisted approximately 20 customers receive $115.1 million in loans under the program. We were among the top banks in Washington State in terms Main Street Loans funded in both dollars and count.”

Under the Main Street Lending Program, the Federal Reserve purchased loans that the bank makes to small and mid-sized businesses, with the Federal Reserve purchasing 95% of each loan. The program, which became operational in early July, was designed to keep credit flowing to small and mid-sized businesses that were in good financial standing before the onset of the COVID-19 pandemic, but which came under extreme stress due to stay-at-home and business closure orders from state and local governments.

“In addition to the SBA’s PPP and the Federal Reserve’s Main Street Lending Program, we implemented additional programs to support our customers experiencing financial hardship as a result of the pandemic. These assistances included payment forbearance agreements with some customers for periods of up to six months. We deferred payment on 357 loans totaling $177.6 million through December 31, 2020. As of December 31, 2020, the deferral period had ended and payments voluntarily resumed for approximately 94.7% of these loans, of which 93.8% have resumed normal payments. Only 2.2% requested a second deferral period,” added Deines.

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

	% of Total Loan Portfolio	Deferred Loan Balance	Number of Loans
		(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

Fourth Quarter 2020 Highlights (at or for the quarter ended December 31, 2020)

•	Fourth quarter net income increased to $3.8 million, compared to $3.7 million in the preceding quarter and $2.2 million in the year ago quarter.
•	Diluted earnings per share was $0.41, up from $0.40 per share in the preceding quarter and $0.23 per share compared to the fourth quarter a year ago.
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•	Provision for loan losses was $930,000 in the fourth quarter, compared to $1.4 million in the third quarter of 2020 and $249,000 in the fourth quarter of 2019.
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•	Loans receivable increased 7.6% to $1.14 billion at December 31, 2020, compared to $1.06 billion at September 30, 2020, and increased 30.0% compared to $878.4 million a year ago, primarily due to growth in commercial real estate and commercial business loans, including PPP loans.
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•	Deposits increased 6.3% during the quarter and increased 33.1% from one year prior, to $1.33 billion at December 31, 2020, due to successful organic and wholesale deposit-gathering strategies, including significant growth in noninterest-bearing deposits, which increased 71.4 % in 2020.
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•	The cost of deposits for the fourth quarter decreased to 0.33% from 0.45% for third quarter 2020 and 0.77% in the fourth quarter of 2019.
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•	Gain on sale of mortgage loans was $2.3 million for the fourth quarter compared to $1.7 million in the previous quarter and $247,000 in the fourth quarter of 2019 reflecting strong quarterly mortgage originations, including refinance activity.
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•	During the fourth quarter, the Company repurchased 15,553 shares of common stock at an average price of $15.67 per share for a total of $244,000, leaving 1,007,867 shares remaining under the 2020 Stock Repurchase Plan approved in October 2020.
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Balance Sheet Review

Total assets increased $89.7 million, or 5.7%, to $1.65 billion, at December 31, 2020, compared to $1.56 billion at September 30, 2020, and increased $347.0 million, or 26.5%, compared to $1.31 billion, at December 31, 2019.

Investment securities decreased $4.8 million to $364.3 million, at December 31, 2020, compared to $369.1 million three months earlier and increased $48.7 million compared to $315.6 million, at December 31, 2019. At December 31, 2020, municipal bonds totaled $127.9 million and comprised the largest portion of the investment portfolio at 35.1%. The estimated average life of the total investment securities portfolio was 7.3 years, and the average repricing term was approximately 4.9 years.

“We continue to utilize the investment portfolio for liquidity and interest income generation,” said Geri Bullard, EVP/Chief Financial Officer. “We began adding to the investment portfolio in the second quarter as deposits increased in the early stages of the pandemic and credit spreads widened, creating more desirable opportunities.”

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

	December 31, 2020		September 30, 2020		December 31, 2019		Three Month Change			One Year Change
	(In thousands)
Available for Sale at Fair Value	****	****	****	****	****	****	****	****	****	****	****	****
Municipal bonds	$	127,862	$	97,143	$	39,282	$	30,719		$	88,580
U.S. government agency issued asset-backed securities (ABS agency)		63,820		73,618		28,858		(9,798	)		34,962
Corporate issued asset-backed securities (ABS corporate)		29,280		32,747		40,855		(3,467	)		(11,575	)
Corporate issued debt securities (Corporate debt)		35,510		33,230		9,643		2,280			25,867
U.S. Small Business Administration securities (SBA)		18,564		23,864		28,459		(5,300	)		(9,895	)
Mortgage-backed securities:
U.S. government agency issued mortgage-backed securities (MBS agency)		62,683		92,402		160,167		(29,719	)		(97,484	)
Corporate issued mortgage-backed securities (MBS corporate)		26,577		16,107		8,316		10,470			18,261
Total securities available for sale	$	364,296	$	369,111	$	315,580	$	(4,815	)	$	48,716

Total loans, excluding loans held for sale, increased $81.2 million, or 7.6%, to $1.14 billion at December 31, 2020, from $1.06 billion at September 30, 2020, and increased $263.5 million, or 30.0%, from $878.4 million a year ago. “The collective efforts of our lending team during the year resulted in significant increases in balances, with total loans increasing 30.6% during the year, and total loans, excluding PPP loans increasing 28.0% during the year,” said Randy Riffle, EVP/Chief Lending Officer. “Additionally, PPP loans helped fuel loan production, with $32.2 million in total PPP loans funded in 2020. The first round of PPP expired on August 8, 2020 and as of year-end, we had submitted 171 forgiveness applications to the SBA totaling $13.5 million and received payment from the SBA for 114 borrowers. Approximately $182,000 of the income recognized during the fourth quarter was related to deferred fees associated with PPP loan payoffs.”

The Company originated $95.7 million in residential mortgages during the quarter and sold $59.3 million, with an average gross margin on sale of mortgage loans of approximately 3.01%. This production compares to residential mortgage originations of $41.1 million in the preceding quarter with sales of $48.0 million. “The activity in the mortgage market continued to exceed historical volumes again during the fourth quarter of 2020, especially for refinances of existing mortgages as interest rates remain at historically low levels,” said Kelly Liske, Chief Banking Officer.

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

	December 31, 2020			September 30, 2020			December 31, 2019			Three Month Change			One Year Change
	(In thousands)
Real Estate:	****	****	****	****	****	****	****	****	****	****	****	****	****	****	****
One to four family	$	309,828		$	317,755		$	306,014		$	(7,927	)	$	3,814
Multi-family		162,467			127,569			96,098			34,898			66,369
Commercial real estate		296,574			283,390			255,722			13,184			40,852
Construction and land		123,627			75,204			37,187			48,423			86,440
Total real estate loans		892,496			803,918			695,021			88,578			197,475
Consumer:	****	****	****	****	****	****	****	****	****	****	****	****	****	****	****
Home equity		33,103			34,120			35,046			(1,017	)		(1,943	)
Auto and other consumer		128,233			111,782			112,119			16,451			16,114
Total consumer loans		161,336			145,902			147,165			15,434			14,171
Commercial business		100,201			123,036			41,571			(22,835	)		58,630
Total loans		1,154,033			1,072,856			883,757			81,177			270,276
Less:	****	****	****	****	****	****	****	****	****	****	****	****	****	****	****
Net deferred loan fees		4,346			2,628			206			1,718			4,140
Premium on purchased loans, net		(6,129	)		(4,196	)		(4,514	)		(1,933	)		(1,615	)
Allowance for loan losses		13,847			13,007			9,628			840			4,219
Total loans receivable, net	$	1,141,969		$	1,061,417		$	878,437		$	80,552		$	263,532

The Company continues to monitor the sectors that have been most heavily impacted by the COVID-19 pandemic. The table below presents selected information on loans to these industries as of December 31, 2020.

Industry	% of Total Loan Portfolio	Loan Balance	Number of Loans	Average Loan-to-Value
		(In thousands)
Hospitality	4.4%	$49,181	15	61.4%
Restaurant and food services	0.2	1,915	6	64.9
Lessors of commercial real estate to hospitality, restaurant, and retail establishments	4.4	48,894	27	51.02

Total deposits increased $79.1 million, or 6.3%, to $1.33 billion at December 31, 2020, compared to $1.25 billion at September 30, 2020 and increased $331.9 million, or 33.1%, when compared to $1.00 billion a year ago. Savings accounts decreased 2.7% compared to a year ago, to $164.4 million at December 31, 2020, and represented 12.3% of total deposits; transaction accounts increased 55.9% compared to a year ago to $431.2 million at December 31, 2020, and account for 32.3% of total deposits; money market accounts increased 73.0% compared to a year ago to $429.1 million, and represented 32.2% of total deposits, and certificates of deposit remained unchanged compared to a year ago at $308.8 million at year-end, and represent 23.2% of total deposits.

“Deposit balances remain at record levels, as consumers continue to build cash reserves,” said Bullard. “We are strategically increasing non-interest bearing and other core deposits to manage overall funding costs and interest rate risk. We held $93.9 million, or 7.0% of total deposits, in brokered CDs included in our balance of certificates of deposit at December 31, 2020, and $92.6 million, or 7.4% of total deposits in brokered CDs at September 30, 2020. The weighted-average cost of brokered CDs improved to 0.36% for the fourth quarter of 2020, compared to 0.51% for the previous quarter. We were able to lower our total cost of funds over the quarter by shifting our deposit mix toward noninterest-bearing and other core deposits.” Total cost of funds improved to 0.38% for the fourth quarter of 2020 compared to 0.50% for the third quarter of 2020.

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Deposits consisted of the following at the dates indicated:

	December 31, 2020		September 30, 2020		December 31, 2019		Three Month Change			One Year Change
	(In thousands)
Savings	$	164,434	$	171,905	$	168,983	$	(7,471	)	$	(4,549	)
Transaction accounts		431,171		390,867		276,496		40,304			154,675
Money market accounts		429,143		398,144		248,086		30,999			181,057
Certificates of deposit		308,769		293,540		308,080		15,229			689
Total deposits	$	1,333,517	$	1,254,456	$	1,001,645	$	79,061		$	331,872

Total shareholders' equity increased to $186.4 million at December 31, 2020, compared to $180.7 million three months earlier, and $176.9 million a year earlier. The quarter-over-quarter increase in equity was due to earnings of $3.8 million and an increase to other comprehensive income based on the improvement in the market value of the investment portfolio of $2.3 million, partially offset by the cost of stock buybacks. Book value per common share increased to $18.20 at December 31, 2020, compared to $17.65 at September 30, 2020 and $16.48 at December 31, 2019.

Operating Results

In the fourth quarter of 2020, the Company generated a return on average assets ("ROAA") of 0.97%, and a return on average equity ("ROAE") of 8.32%, compared to 0.99% and 8.22%, respectively, in the third quarter of 2020, and 0.71% and 4.99%, respectively, in the fourth quarter a year ago.

Total interest income increased to $14.0 million for the fourth quarter of 2020, compared to $13.4 million in the previous quarter and $11.8 million in the fourth quarter of 2019. Interest and fees on loans increased due to loan growth which offset a small decrease in investment interest income. Quarter over quarter, the yield on total investment securities decreased 8 basis points while the yield on average loans receivable decreased by 4 basis points. Total interest expense was $1.3 million for the fourth quarter of 2020, compared to $1.6 million in the third quarter of 2020, and $2.6 million in the fourth quarter a year ago. The decrease in interest expense was due to the decline in the cost of deposits to 42 basis points from 45 basis points in the prior quarter and from 105 basis points the fourth quarter one year ago.

Net interest income, before provision for loan losses, increased 7.8% during the quarter to $12.7 million, compared to $11.8 million for the preceding quarter and increased 38.4% compared to $9.2 million in the fourth quarter a year ago. For the year 2020, net interest income, before the provision for loan losses, increased 16.1% to $44.0 million, compared to $37.9 million for the year 2019. Due to loan growth and the COVID-19 pandemic and the related impact to the business environment, the Company recorded a $930,000 provision for loan losses during the fourth quarter of 2020. This compares to a provision for loan losses of $1.4 million for the preceding quarter, and a provision for loan losses of $249,000 for the fourth quarter of 2019. For the full year 2020, the provision for loan losses was $5.0 million, compared to $669,000 for 2019.

The net interest margin expanded 10 basis point to 3.46% for the fourth quarter of 2020, compared to 3.36% for the third quarter of 2020, and increased 32 basis points compared to 3.14% for the fourth quarter in 2019. “Our improved earning asset mix as well as our lower cost of funds had a positive impact on our net interest margin again this quarter,” said Bullard. For the year 2020, the net interest margin was 3.27% compared to 3.20% in 2019.

The yield on earning assets decreased 1 basis point to 3.81% for the fourth quarter of 2020, compared to 3.82% for the third quarter of 2020, and decreased from 4.03% for the fourth quarter in 2019. 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 decreased to 4.41% for the fourth quarter 2020, from 4.45% for the third quarter 2020, and decreased from 4.50% for the fourth quarter of 2019. The cost of interest-bearing liabilities decreased 13 basis points to 0.47% for the fourth quarter of 2020 compared to 0.60% for the third quarter of 2020 and decreased 70 basis points from 1.17% for the fourth quarter in 2019. “Over the past year we have been actively working on changing the mix of our funding profile and lowering our cost of deposits. We anticipate moderate additional cost save improvements in our certificate of deposit portfolio,” said Bullard.

Noninterest income decreased 3.0% to $4.6 million for the fourth quarter 2020 from $4.8 million for the third quarter 2020 and increased 91.4% compared to $2.4 million for the fourth quarter in 2019. Fourth quarter of 2020 included a $2.3 million gain on sale of loans compared to a $1.7 million gain on sale of loans in the preceding quarter and a $247,000 gain on sale of loans in the fourth quarter a year ago. Noninterest income growth during the fourth quarter of 2020 was driven by increased mortgage refinance activity, which resulted in strong loan sale activity, as well as a gain on sale of investment securities of $912,000. Loan and deposit service fees totaled $940,000 for the fourth quarter 2020, compared to $868,000 for the preceding quarter and $994,000 for the fourth quarter a year ago. For the year 2020, noninterest income more than doubled to $15.8 million, compared to $7.0 million in 2019, reflecting substantial increases in gain on sale of investment securities and gain on sale of loans. Noninterest income also increased due to the higher cash surrender value of bank owned life insurance (BOLI) due to increased investment in BOLI, as well as a restructure of the existing BOLI policies into superior products.

Noninterest expense totaled $11.7 million for the fourth quarter of 2020, compared to $10.1 million for the preceding quarter and $8.6 million for the fourth quarter a year ago. The quarterly increase reflects higher compensation expense, including salaries, commissions and benefits. For the year 2020, noninterest expense increased to $41.5 million, compared to $33.1 million in 2019, due to higher salary and benefit expenses, including employee production-related commission payments, increased advertising spending and increases in operational expenses associated with overall asset growth.

Capital Ratios and Credit Quality

Capital levels for both the Company and its operating bank, First Federal, remain in excess of applicable regulatory requirements and the Bank was categorized as "well-capitalized" at December 31, 2020. Common Equity Tier 1 and Total Risk-Based Capital Ratios at December 31, 2020 were 13.4% and 14.6%, respectively.

Nonperforming loans decreased to $2.3 million at December 31, 2020, from $3.1 million at September 30, 2020. The percentage of the allowance for loan losses to nonperforming loans increased to 609.2%, at December 31, 2020, from 419.9% at September 30, 2020, and 536.1% at December 31, 2019. Classified loans increased $3.5 million during the current quarter to $7.5 million at December 31, 2020, reflecting a downgrade in a commercial real estate relationship. The allowance for loan losses as a percentage of total loans was 1.2% at December 31, 2020, compared to 1.2% at September 30, 2020, and 1.1% at December 31, 2019.

About the Company

First Northwest is a bank holding company which primarily engages in the business activity of its subsidiary, First Federal. First Federal 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, and 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.

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FIRST NORTHWEST BANCORP AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

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

			September 30, 2020			December 31, 2019			Three Month Change			One Year Change
Assets	****	****	****	****	****	****	****	****	****	****	****	****	****	****
Cash and due from banks	13,508		$	16,776		$	13,519			-19.5	%		-0.1	%
Interest-bearing deposits in banks	51,647			35,303			35,220			46.3			46.6
Investment securities available for sale, at fair value	364,296			369,111			315,580			-1.3			15.4
Loans held for sale	3,753			4,754			503			-21.1			646.1
Loans receivable (net of allowance for loan losses of 13,847, 13,007, and 9,628)	1,141,969			1,061,417			878,437			7.6			30.0
Federal Home Loan Bank (FHLB) stock, at cost	5,977			5,944			6,034			0.6			-0.9
Accrued interest receivable	6,966			7,367			3,931			-5.4			77.2
Premises and equipment, net	14,785			14,737			14,342			0.3			3.1
Mortgage servicing rights, net	2,120			1,545			871			37.2			143.4
Bank-owned life insurance, net	38,353			38,104			30,027			0.7			27.7
Prepaid expenses and other assets	10,975			9,612			8,872			14.2			23.7
Total assets	1,654,349		$	1,564,670		$	1,307,336			5.7	%		26.5	%
Liabilities and Shareholders' Equity	****	****	****	****	****	****	****	****	****	****	****	****	****	****
Deposits	1,333,517		$	1,254,456		$	1,001,645			6.3	%		33.1	%
Borrowings	109,977			109,150			112,930			0.8			-2.6
Accrued interest payable	53			51			373			3.9			-85.8
Accrued expenses and other liabilities	23,303			18,359			14,392			26.9			61.9
Advances from borrowers for taxes and insurance	1,116			1,986			1,145			-43.8			-2.5
Total liabilities	1,467,966			1,384,002			1,130,485			6.1			29.9
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 10,247,185 at December 31, 2020; issued and outstanding 10,234,204 at September 30, 2020; and issued and outstanding 10,731,639 at December 31, 2019	102			102			107			0.0			-4.7
Additional paid-in capital	97,412			97,229			102,017			0.2			-4.5
Retained earnings	92,657			89,546			86,156			3.5			7.5
Accumulated other comprehensive loss, net of tax	5,442			3,186			(1,539	)		70.8			453.6
Unearned employee stock ownership plan (ESOP) shares	(9,230	)		(9,395	)		(9,890	)		1.8			6.7
Total shareholders' equity	186,383			180,668			176,851			3.2			5.4
Total liabilities and shareholders' equity	1,654,349		$	1,564,670		$	1,307,336			5.7	%		26.5	%

All values are in US Dollars.

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FIRST NORTHWEST BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

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

	Quarter Ended
	December 31, 2020		September 30, 2020		December 31, 2019		Three Month Change			One Year Change
INTEREST INCOME
Interest and fees on loans receivable	$	11,894	$	11,097	$	9,505		7.2	%		25.1	%
Interest on mortgage-backed and related securities		437		565		1,070		-22.7			-59.2
Interest on investment securities		1,581		1,603		1,065		-1.4			48.5
Interest on deposits in banks		9		9		54		0.0			-83.3
FHLB dividends		56		97		64		-42.3			-12.5
Total interest income		13,977		13,371		11,758		4.5			18.9
INTEREST EXPENSE
Deposits		1,079		1,405		2,171		-23.2			-50.3
Borrowings		221		205		427		7.8			-48.2
Total interest expense		1,300		1,610		2,598		-19.3			-50.0
Net interest income		12,677		11,761		9,160		7.8			38.4
PROVISION FOR LOAN LOSSES		930		1,350		249		-31.1			273.5
Net interest income after provision for loan losses		11,747		10,411		8,911		12.8			31.8
NONINTEREST INCOME
Loan and deposit service fees		940		868		994		8.3			-5.4
Mortgage servicing fees, net of amortization		146		148		33		-1.4			342.4
Net gain on sale of loans		2,324		1,725		247		34.7			840.9
Net gain on sale of investment securities		912		969		779		-5.9			17.1
Increase in cash surrender value of bank-owned life insurance		249		622		273		-60.0			-8.8
Other income		67		449		97		-85.1			-30.9
Total noninterest income		4,638		4,781		2,423		-3.0			91.4
NONINTEREST EXPENSE
Compensation and benefits		7,193		6,070		4,902		18.5			46.7
Data processing		691		640		645		8.0			7.1
Occupancy and equipment		1,663		1,367		1,233		21.7			34.9
Supplies, postage, and telephone		236		254		205		-7.1			15.1
Regulatory assessments and state taxes		271		262		210		3.4			29.0
Advertising		572		285		512		100.7			11.7
Professional fees		408		361		214		13.0			90.7
FDIC insurance premium		89		86		—		3.5			100.0
Other		596		756		700		-21.2			-14.9
Total noninterest expense		11,719		10,081		8,621		16.2			35.9
INCOME BEFORE PROVISION FOR INCOME TAXES		4,666		5,111		2,713		-8.7			72.0
PROVISION FOR INCOME TAXES		850		1,436		495		-40.8			71.7
NET INCOME	$	3,816	$	3,675	$	2,218		3.8	%		72.0	%
Basic and diluted earnings per common share	$	0.41	$	0.40	$	0.23		2.5	%		78.3	%

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FIRST NORTHWEST BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

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

	Year Ended December 31,				Percent
	2020		2019		Change
INTEREST INCOME
Interest and fees on loans receivable	$	43,063	$	40,166		7.2	%
Interest on mortgage-backed and related securities		2,701		4,606		-41.4
Interest on investment securities		5,569		3,965		40.5
Interest on deposits in banks		94		244		-61.5
FHLB dividends		255		332		-23.2
Total interest income		51,682		49,313		4.8
INTEREST EXPENSE
Deposits		6,663		8,304		-19.8
Borrowings		1,061		3,144		-66.3
Total interest expense		7,724		11,448		-32.5
Net interest income		43,958		37,865		16.1
PROVISION FOR LOAN LOSSES		5,046		669		654.3
Net interest income after provision for loan losses		38,912		37,196		4.6
NONINTEREST INCOME
Loan and deposit service fees		3,454		3,893		-11.3
Mortgage servicing fees, net of amortization		137		176		-22.2
Net gain on sale of loans		6,433		1,077		497.3
Net gain on sale of investment securities		3,147		836		276.4
Increase in cash surrender value of bank-owned life insurance		1,826		708		157.9
Other income		849		322		163.7
Total noninterest income		15,846		7,012		126.0
NONINTEREST EXPENSE
Compensation and benefits		24,590		18,999		29.4
Data processing		2,790		2,623		6.4
Occupancy and equipment		5,726		4,642		23.4
Supplies, postage, and telephone		985		883		11.6
Regulatory assessments and state taxes		930		783		18.8
Advertising		1,506		1,081		39.3
Professional fees		1,523		1,121		35.9
FDIC insurance premium		245		82		198.8
FHLB prepayment penalty		210		344		-39.0
Other		2,959		2,559		15.6
Total noninterest expense		41,464		33,117		25.2
INCOME BEFORE PROVISION FOR INCOME TAXES		13,294		11,091		19.9
PROVISION FOR INCOME TAXES		2,954		2,077		42.2
NET INCOME	$	10,340	$	9,014		14.7	%
Basic earnings per common share	$	1.11	$	0.92		20.7	%
Diluted earnings per common share	$	1.10	$	0.91		20.9	%

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FIRST NORTHWEST BANCORP AND SUBSIDIARY

Selected Financial Ratios and Other Data

(Unaudited)

	As of or For the Quarter Ended
	December 31, 2020			September 30, 2020			June 30, 2020			March 31, 2020			December 31, 2019
Performance ratios: (1)			****			****			****			****			****
Return on average assets		0.97	%		0.99	%		0.56	%		0.27	%		0.71	%
Return on average equity		8.32			8.22			4.60			1.94			4.99
Average interest rate spread		3.35			3.22			2.90			2.86			2.86
Net interest margin (2)		3.46			3.36			3.10			3.11			3.14
Efficiency ratio (3)		67.7			60.9			72.3			80.0			74.4
Average interest-earning assets to average interest-bearing liabilities		131.7			130.9			129.5			130.1			131.8
Book value per common share	$	18.20		$	17.65		$	17.07		$	16.02		$	16.48
Asset quality ratios:			****			****			****			****			****
Nonperforming assets to total assets at end of period (4)		0.1	%		0.2	%		0.2	%		0.2	%		0.2	%
Nonperforming loans to total loans (5)		0.2			0.3			0.3			0.2			0.2
Allowance for loan losses to nonperforming loans (5)		609.2			419.9			360.8			622.4			536.1
Allowance for loan losses to total loans		1.2			1.2			1.2			1.2			1.1
Net charge-offs to average outstanding loans		—			—			—			—			—
Capital ratios (First Federal):			****			****			****			****			****
Tier 1 leverage	10.3		%		10.5	%		10.9	%		11.8	%		12.2	%
Common equity Tier 1 capital	13.4				14.7			15.1			16.8			17.5
Tier 1 risk-based	13.4				14.7			15.1			16.8			17.5
Total risk-based	14.6				16.0			16.4			18.1			18.7
Other Information:			****			****			****			****			****
Average total assets	$	1,567,521		$	1,488,723		$	1,401,500		$	1,287,529		$	1,242,780
Average interest-earning assets		1,466,103			1,401,090			1,305,437			1,208,314			1,167,805
Average total loans		1,089,505			1,009,210			938,646			876,135			849,741
Average equity		183,424			178,887			172,009			179,614			177,759
Average deposits		1,277,632			1,227,656			1,133,665			1,008,410			985,788
(1)	Performance ratios are annualized, where appropriate.
---	---
(2)	Net interest income divided by average interest-earning assets.
(3)	Total noninterest expense as a percentage of net interest income and total other noninterest income.
(4)	Nonperforming assets consists of nonperforming loans (which include nonaccruing loans and accruing loans more than 90 days past due), real estate owned and repossessed assets.
(5)	Nonperforming loans consists of nonaccruing loans and accruing loans more than 90 days past due.

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FIRST NORTHWEST BANCORP AND SUBSIDIARY

Selected Financial Ratios and Other Data

(Unaudited) (continued)

	As of or For the Year Ended December 31,
	2020			2019
Performance ratios: (1)			****			****
Return on average assets		0.72	%		0.72	%
Return on average equity		5.79			5.13
Average interest rate spread		3.09			2.91
Net interest margin (2)		3.27			3.20
Efficiency ratio (3)		69.3			73.8
Average interest-earning assets to average interest-bearing liabilities		130.6			129.8
Book value per common share	$	18.20		$	16.48
Asset quality ratios:			****			****
Nonperforming assets to total assets at end of period (4)		0.1	%		0.2	%
Nonperforming loans to total loans (5)		0.2			0.2
Allowance for loan losses to nonperforming loans (5)		609.2			536.1
Allowance for loan losses to total loans		1.2			1.1
Net charge-offs to average outstanding loans		0.1			0.1
Capital ratios (First Federal):			****			****
Tier 1 leverage	10.3		%		12.2	%
Common equity Tier 1 capital	13.4				17.5
Tier 1 risk-based	13.4				17.5
Total risk-based	14.6				18.7
Other Information:			****			****
Average total assets	$	1,436,895		$	1,255,581
Average interest-earning assets		1,345,770			1,181,923
Average total loans		978,799			870,696
Average equity		178,498			175,578
Average deposits		1,162,323			957,557
(1)	Performance ratios are annualized, where appropriate.
---	---
(2)	Net interest income divided by average interest-earning assets.
(3)	Total noninterest expense as a percentage of net interest income and total other noninterest income.
(4)	Nonperforming assets consists of nonperforming loans (which include nonaccruing loans and accruing loans more than 90 days past due), real estate owned and repossessed assets.
(5)	Nonperforming loans consists of nonaccruing loans and accruing loans more than 90 days past due.