First Northwest Bancorp First Quarter 2022 Financial

First Northwest Bancorp First Quarter 2022 Financial

PORT ANGELES, Wash., April 29, 2022 (GLOBE NEWSWIRE) — First Northwest Bancorp (Nasdaq: FNWB)

Q1 2022 Net Income Q1 2022 Diluted Earnings Per Share Q1 2022 Net Interest Margin Book Value per Share
$2.8 million $0.30
3.53
%
$17.77
 $17.561, excluding goodwill and intangibles

CEO Commentary

“We made good progress in the first quarter, continuing to build First Fed into a leading, fintech-enabled community bank,” said Matthew P. Deines, President and CEO of First Northwest Bancorp. “We announced a strategic partnership with Splash Financial to meet the financial needs of consumers across the United States. We expanded the Quin Ventures product offering in response to marketplace demand. And we established First Fed Fintech Partners, known as F3P, to manage our growing portfolio of fintech initiatives.”

“Our commercial bank is well-positioned to continue to harvest the returns on the investments we have made over the last two years,” Deines added. “Operating expenses were stable from the last quarter, and we believe we will be able to produce operating leverage in a rising rate environment.”

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 May 27, 2022, to shareholders of record as of the close of business on May 13, 2022.

Quarter Ended March 31, 2022 to December 31, 2021 Quarter Ended March 31, 2022 to March 31, 2021
Financial Highlights
Net income of $2.8 million and diluted earnings per share of $0.30, compared to $5.1 million and $0.55, respectively Net income of $2.8 million and diluted earnings per share of $0.30, compared to $3.1 million and $0.33, respectively
Total revenue (net interest income before provision plus noninterest income) of $17.9 million, a decrease of 13.1%, or $2.7 million, compared to an increase in non-interest expenses of 1.0%, or $153,000 Total revenue of $17.9 million, an increase of 10.5%, or $1.7 million, compared to an increase in non-interest expenses of 22.6%, or $2.7 million
Effective tax rate of 18.1%, compared to 18.3% Effective tax rate of 18.1%, compared to 13.2%
Financial Position  
Total assets of $1.94 billion, up $23.2 million, or 1.2% Increase in total assets of $208.0 million, or 12.0%
Total gross loans, excluding loans held for sale, of $1.38 billion, up $17.9 million, or 1.3% Increase in total gross loans, excluding loans held for sale, of $206.7 million, or 17.7%
Total deposits of $1.55 billion, a decline of $31.2 million, or 2.0% Increase in total deposits of $114.6 million, or 8.0%
Asset Quality and Capital  
Nonperforming assets (nonaccrual loans and repossessed assets) to total assets of 0.06%, compared to 0.07% Nonperforming assets (nonaccrual loans and repossessed assets) to total assets of 0.06%, compared to 0.12%
Tangible common equity ratio1 of 9.04%, compared to 9.82% Tangible common equity ratio1 of 9.04%, compared to 10.49%
Key Performance Metrics  
Net interest margin of 3.53%, compared to 3.58% Net interest margin of 3.53%, compared to 3.48%
Efficiency ratio of 82.9%, compared to 70.5% Efficiency ratio of 82.9%, compared to 74.7%
Return on average assets and return on tangible common equity1 of 0.60% and 6.09%, compared to 1.09% and 10.82%, respectively Return on average assets and return on tangible common equity1 of 0.60% and 6.09%, compared to 0.76% and 6.80%, respectively
Tangible book value per share1 of $17.56, a decrease of 7.07% from $18.89 Tangible book value per share1 of $17.56, a decrease of 1.7% from $17.86

 

_____________
1 See reconciliation of Non-GAAP Financial Measures later in this release.

Balance Sheet Review

Total assets increased $23.2 million, or 1.2%, to $1.94 billion at March 31, 2022, compared to $1.92 billion at December 31, 2021, and increased $208.0 million, or 12.0%, compared to $1.74 billion at March 31, 2021.

Cash and cash equivalents decreased by $43.5 million, or 34.5%, to $82.5 million as of March 31, 2022, compared to $126.0 million as of December 31, 2021. Excess cash was deployed into the investment and loan portfolios as First Fed Bank continued to build earning assets.

Investment securities increased $33.5 million, or 9.7%, to $377.7 million at March 31, 2022, compared to $344.2 million three months earlier, and decreased $15.8 million compared to $393.5 million at March 31, 2021. At March 31, 2022, municipal bonds totaled $110.2 million and comprised the largest portion of the investment portfolio at 29.2%. The estimated average life of the total investment securities portfolio was approximately 7.0 years, compared to 5.7 years in the prior quarter and 7.5 years in the first quarter of 2021.

Investment securities consisted of the following at the dates indicated:

    March 31,
2022
    December 31,
2021
    March 31,
2021
    Three Month
Change
    One Year
Change
 
    (In thousands)  
Available for Sale at Fair Value                                        
Municipal bonds   $ 110,248     $ 113,364     $ 132,492     $ (3,116 )   $ (22,244 )
U.S. Treasury notes     2,450                   2,450       2,450  
International agency issued bonds (Agency bonds)     1,811       1,920       1,913       (109 )     (102 )
U.S. government agency issued asset-backed securities (ABS agency)                 65,910             (65,910 )
Corporate issued asset-backed securities (ABS corporate)           14,489       17,505       (14,489 )     (17,505 )
Corporate issued debt securities (Corporate debt)     59,904       59,789       43,890       115       16,014  
U.S. Small Business Administration securities (SBA)     2,777       14,680       17,566       (11,903 )     (14,789 )
Mortgage-backed securities:                                        
U.S. government agency issued mortgage-backed securities (MBS agency)     96,064       79,962       74,016       16,102       22,048  
Corporate issued mortgage-backed securities (MBS corporate)     104,441       60,008       40,203       44,433       64,238  
Total securities available for sale   $ 377,695     $ 344,212     $ 393,495     $ 33,483     $ (15,800 )

Net loans, excluding loans held for sale, increased $20.3 million, or 1.5%, to $1.37 billion at March 31, 2022, from $1.35 billion at December 31, 2021, and increased $214.2 million, or 18.5%, from $1.16 billion a year ago. Multi-family loans increased $31.3 million during the current quarter as $16.6 million of acquisition-renovation construction and $13.6 million of commercial construction loans transitioned into amortizing loans. Consumer loans increased $16.0 million from the purchase of pool manufactured home loans, $5.9 million in individual manufactured home loan purchases, and a net increase in auto loans of $2.4 million. Construction loans decreased as projects were completed and transitioned to amortizing loans, exceeding disbursements on new and existing projects. Commercial business loans decreased $25.3 million during the quarter, mainly as the result of a decrease in Northpointe Mortgage Participation Program loans of $26.3 million and Paycheck Protection Program (“PPP”) loans paid off during the quarter of $7.3 million. Our participation in the Northpointe program is based on current funding needs of the program. Given the slowdown in the mortgage market, as well as recent financing activities by Northpointe, we do not anticipate significant lending activity in the near term.

The Company originated $13.3 million in residential mortgages during the first quarter and sold $10.3 million, with an average gross margin on sale of mortgage loans of approximately 2.69%. This production compares to residential mortgage originations of $26.6 million in the preceding quarter with sales of $25.1 million, with an average gross margin of 2.64%. Rising mortgage loan rates and a lack of single family home inventory have resulted in a decline in mortgage loan production. New single-family residence construction loan commitments totaled $23.6 million in the first quarter of 2022, compared to $21.8 million in the preceding quarter.

Loans receivable consisted of the following at the dates indicated:

    March 31,
2022
    December 31,
2021
    March 31,
2021
    Three Month
Change
    One Year
Change
 
    (In thousands)  
Real Estate:                                        
One to four family   $ 291,053     $ 294,965     $ 295,831     $ (3,912 )   $ (4,778 )
Multi-family     203,746       172,409       162,487       31,337       41,259  
Commercial real estate     370,346       363,299       296,826       7,047       73,520  
Construction and land     209,395       224,709       157,316       (15,314 )     52,079  
Total real estate loans     1,074,540       1,055,382       912,460       19,158       162,080  
                                         
Consumer:                                        
Home equity     39,858       39,172       33,713       686       6,145  
Auto and other consumer     206,140       182,769       139,134       23,371       67,006  
Total consumer loans     245,998       221,941       172,847       24,057       73,151  
                                         
Commercial business     54,506       79,838       83,033       (25,332 )     (28,527 )
                                         
Total loans     1,375,044       1,357,161       1,168,340       17,883       206,704  
Less:                                        
Net deferred loan fees     4,144       4,772       4,983       (628 )     (839 )
Premium on purchased loans, net     (14,816 )     (12,995 )     (7,347 )     (1,821 )     (7,469 )
Allowance for loan losses     15,127       15,124       14,265       3       862  
Total loans receivable, net   $ 1,370,589     $ 1,350,260     $ 1,156,439     $ 20,329     $ 214,150  

Prepaid expenses and other assets increased $6.7 million to $32.5 million at March 31, 2022, compared to $25.7 million at December 31, 2021, and increased $15.4 million compared to $17.1 million a year ago. The increase in the current quarter is mainly due to the increase in deferred tax assets resulting from fair market value decrease of the investment portfolio along with an historic tax credit investment. In addition to the changes recorded during the current quarter, the increase from a year ago also reflects an increase in the operating lease right-of-use asset related to expansion during the prior twelve months and a low income housing tax credit investment made in June 2021.

Total deposits decreased $31.2 million, to $1.55 billion at March 31, 2022, compared to $1.58 billion at December 31, 2021, and increased $114.6 million, or 8.0%, compared to $1.43 billion a year ago. We experienced significant outflow from public and tribal deposit accounts during the quarter as some public entities have been investing in treasury bonds with higher current yields compared to insured deposits. Increases in consumer demand deposit account balances of $9.4 million were offset by a decrease in business demand account balances of $12.1 million and a decrease in public and tribal demand account balances of $7.0 million during the current quarter. Increases in consumer money market deposit account balances of $10.4 million were offset by decreases in public and tribal money market account balances of $26.5 million during the current quarter. The $8.2 million decrease in certificate of deposits was attributable to consumer CDs that matured during the quarter.

Demand deposits increased 14.0% compared to a year ago to $531.2 million at March 31, 2022, and represented 34.3% of total deposits; money market accounts increased 20.6% compared to a year ago to $581.8 million, and represented 37.5% of total deposits; savings accounts increased 6.0% compared to a year ago to $197.4 million at March 31, 2022, and represented 12.7% of total deposits; and certificates of deposit decreased 16.8% compared to a year ago to $239.0 million at quarter-end, and represented 15.4% of total deposits.

The total cost of deposits was 0.19% for the first quarter of 2022 compared to 0.20% for the fourth quarter of 2021 and improved from 0.27% for the first quarter of 2021.

Deposits consisted of the following at the dates indicated:

    March 31,
2022
    December 31,
2021
    March 31,
2021
    Three Month
Change
    One Year
Change
 
    (In thousands)  
Noninterest-bearing demand deposits   $ 326,289     $ 343,932     $ 296,232     $ (17,643 )   $ 30,057  
Interest-bearing demand deposits     204,949       196,970       169,911       7,979       35,038  
Money market accounts     581,804       597,815       495,265       (16,011 )     86,539  
Savings accounts     197,351       194,620       186,173       2,731       11,178  
Certificates of deposit     239,021       247,243       287,226       (8,222 )     (48,205 )
Total deposits   $ 1,549,414     $ 1,580,580     $ 1,434,807     $ (31,166 )   $ 114,607  

Total shareholders’ equity decreased to $177.8 million at March 31, 2022, compared to $190.5 million three months earlier, and decreased from $182.1 million a year earlier, due to a $15.4 million decline in the value of the investment securities portfolio. Fair values have seen across the board declines as sustained inflationary pressures have driven market expectations of significant rate increases by the Federal Reserve Bank in 2022. Tangible book value per common share1 was $17.56 at March 31, 2022, compared to $18.89 at December 31, 2021, and $17.86 at March 31, 2021; while book value per common share was $17.77 at March 31, 2022, compared to $19.10 at December 31, 2021, and $17.86 at March 31, 2021. The current quarter decline in investment securities fair market value had an -8.8% impact on tangible book value. No shares of common stock were repurchased under the October 2020 Plan during the quarter ended March 31, 2022.

Income Statement Results

In the first quarter of 2022, the Company generated a return on average assets (“ROAA”) of 0.60%, and a return on average equity (“ROAE”) of 6.01%, compared to 1.09% and 10.72%, respectively, in the fourth quarter of 2021, and 0.76% and 6.70%, respectively, in the first quarter of 2021.

Total interest income decreased $308,000 to $16.9 million for the first quarter of 2022, compared to $17.2 million in the previous quarter, and increased $2.3 million from $14.6 million in the first quarter of 2021. Interest and fees on loans decreased during the quarter due to less deferred fee income recognized on PPP loans, lower prepayment penalties, and less fee income recognized on loans sold. Total interest expense was $1.4 million for the first quarter of 2022 and fourth quarter of 2021, compared to $1.2 million in the first quarter a year ago. The increase was a result of a higher volume of interest-costing liabilities, subordinated debt issued in mid-March 2021 and additional FHLB borrowings in the current quarter, offset by a decrease in interest paid on certificates of deposit.

Net interest income, before provision for loan losses, for the first quarter decreased 2.1% to $15.5 million, compared to $15.8 million for the preceding quarter, and increased 14.9% from the first quarter a year ago.

The positive impact of PPP loan forgiveness on interest income is declining as the majority of these loans have been forgiven. As of March 31, 2022, we received SBA proceeds on forgiven loans totaling $60.0 million. Approximately $231,000 of the income recognized during the first quarter of 2022 was related to deferred fees associated with PPP loan payoffs, compared to $385,000 in the fourth quarter of 2021. At March 31, 2022, there was approximately $186,000 of PPP loan fee income remaining to be recognized in income.

The Company recorded no loan loss provision during the first quarter of 2022. This compares to a negative provision for loan losses of $150,000 for the preceding quarter, and a provision for loan losses of $500,000 for the first quarter of 2021. The provision reflects improvement in economic conditions, less uncertainty regarding the impact of COVID-19, and stable credit quality metrics compared to the prior year.

The net interest margin decreased 5 basis points to 3.53% for the first quarter of 2022, from 3.58% the prior quarter, and increased 5 basis points over the first quarter of 2021 of 3.48%. The overall impact to the net interest margin related to PPP loan payoffs was 3 basis points for the current quarter compared to 7 basis points in the prior quarter. Increases over the prior year are primarily due to an improvement in our earning asset mix and loan fee income recognized during 2022 from PPP loan payoffs.

The yield on earning assets decreased 4 basis points to 3.86% for the first quarter of 2022, compared to 3.90% for the fourth quarter of 2021, and increased 8 basis points from 3.78% for the first quarter of 2021. The year-over-year increase was due to higher yields on the investment portfolio, coupled with higher average loan balances. The yield on the loan portfolio decreased to 4.43% for the first quarter of 2022, from 4.49% for the fourth quarter of 2021, primarily due to lower fee income and deferred fee income recognition from commercial loan payoffs during the current quarter. 

The cost of interest-bearing liabilities increased 1 basis point to 0.43% for the first quarter of 2022, compared to 0.42% for the fourth quarter of 2021, and increased 3 basis points from 0.40% for the first quarter of 2021. The total cost of funds was 0.34% for both the current and prior quarters, and increased 2 basis points from 0.32% for the first quarter of 2021. The average balance and cost of funds on borrowings increased $63.3 million and 85 basis points, respectively, from the prior year mainly due to the subordinated debt issued in mid-March 2021. The lower-cost average deposit account balances grew $174.3 million and the related cost of deposits decreased 8 basis points from the prior year.

____________
1 See reconciliation of Non-GAAP Financial Measures later in this release.

Noninterest income decreased 49.7% to $2.4 million for the first quarter of 2022 from $4.8 million for the fourth quarter of 2021, and increased 11.1% compared to $2.7 million for the first quarter a year ago. The first quarter of 2022 included $432,000 of servicing fee income from sold loans compared to $88,000 in the preceding quarter, which was positively impacted by an accounting change to report servicing rights on sold loans at fair value, and $30,000 in the first quarter a year ago. Decreases for the quarter were mainly the result of no gain on sale of commercial loans and related servicing right recognition, compared to $1.2 million in the prior quarter; no gain on sale of the guaranteed portion of SBA loans, compared to $360,000 in the prior quarter; swap program participation fees of $149,000, compared to $236,000 in the prior quarter; and a fair market valuation decrease of $67,000 on our investment in Canapi Ventures Fund LP, compared to a gain of $857,000 in the prior quarter.

Noninterest expense totaled $14.8 million for the first quarter of 2022, compared to $14.7 million for the preceding quarter and $12.1 million for the first quarter a year ago. The current quarter increase is due to additional advertising and professional fees, partially offset by lower compensation expense, data processing costs, and FDIC insurance premiums. The increase over the first quarter of 2021 reflects higher compensation expense, including salaries, production-related commissions, incentives and benefits related to additional employees, as well as costs associated with expanding our footprint with two new locations; technology enhancements for digital and mobile banking products; and higher FDIC insurance premiums.

The provision for income tax decreased to $554,000 for the first quarter of 2022, compared to $1.1 million for the fourth quarter of 2021 and $473,000 for the first quarter of 2021, reflecting changes in pre-tax income. Additionally, a tax accrual true-up of $178,000 was recorded in the first quarter of 2021.

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, 2022. Common Equity Tier 1 and Total Risk-Based Capital Ratios at March 31, 2022 were 13.1% and 14.1%, respectively.

Nonperforming loans were $1.2 million at March 31, 2022, a decrease of $148,000 from December 31, 2021, related to brokered and purchased auto loans. The percentage of the allowance for loan losses to nonperforming loans increased to 1227% at March 31, 2022, from 1095% at December 31, 2021, and increased from 668% at March 31, 2021. Classified loans increased $1.7 million during the first quarter to $14.3 million at March 31, 2022, due to a single-family residence construction loan relationship. The allowance for loan losses as a percentage of total loans was 1.10% at March 31, 2022, a decrease from 1.11% reported for the prior quarter and from 1.22% reported one year earlier.

Awards/Recognition

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

In April 2021, First Fed was recognized as a Top Corporate Citizen by the Puget Sound Business Journal. The Corporate Citizenship Awards honors local corporate philanthropists and companies making significant contributions in the region. The top 25 small, medium and large-sized companies were recognized in addition to nine other honorees this year. First Fed was ranked #4 in the medium-sized company category.

In May 2021, First Fed was named to the Middle Market Fast 50 List by the Puget Sound Business Journal. First Fed also made the Fast 50 list for 2020, which recognizes the region’s fastest-growing middle market companies.

On June 24, First Fed was named to the Forbes Best Banks list for 2021 and included on the Forbes Best Bank in Washington list. Nearly 25,000 Americans were surveyed for their opinions on their current and former banking relationships. Only 135 banks (2.7%) made the list of the nearly 5,000 FDIC-insured banks in the country. First Fed was one of three in Washington to be recognized as a Best Bank based on customer feedback.

Additionally, on June 14 First Fed was named on the Puget Sound Business Journal’s Best Workplaces list. First Fed has been recognized as one the top 100 workplaces in Washington, as voted by each company’s own employees.

About the Company

First Northwest Bancorp (Nasdaq: FNWB) is a bank holding company engaged in investment activities including the business activity of its subsidiary, First Fed Bank. First Fed is a community-oriented financial institution which has served 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 business, and commercial customers. Additionally, First Fed focuses on strategic partnerships with financial technology (“fintech”) companies to develop and deploy digitally focused financial solutions to meet customers’ needs on a broader scale. FNWB also invests in fintech companies directly as well as through select venture capital partners. In 2021, the Company entered a joint venture to found Quin, a fintech focused on financial wellness and lifestyle protection for consumers nationwide. Other fintech partnership initiatives include banking-as-a-service, digital payments and marketplace lending. FNWB was incorporated in 2012 and 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 or range of factors including, but not limited to: increased competitive pressures; changes in the interest rate environment; the credit risks of lending activities; changes in general economic conditions and conditions within the securities markets; legislative and regulatory changes; and other factors described in the Companys 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 SECs 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 2022 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us and could negatively affect the Companys operations and stock price performance.

FIRST NORTHWEST BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data) (Unaudited)

    March 31,
2022
    December 31,
2021
    March 31,
2021
    Three Month
Change
    One Year
Change
 
Assets                                        
                                         
Cash and due from banks   $ 16,271     $ 13,868     $ 15,827       17.3 %     2.8 %
Interest-earning deposits in banks     66,257       112,148       83,444       -40.9       -20.6  
Investment securities available for sale, at fair value     377,695       344,212       393,495       9.7       -4.0  
Loans held for sale     1,334       760       4,037       75.5       -67.0  
Loans receivable (net of allowance for loan losses of $15,127, $15,124, and $14,265)     1,370,589       1,350,260       1,156,439       1.5       18.5  
Federal Home Loan Bank (FHLB) stock, at cost     8,122       5,196       3,997       56.3       103.2  
Accrued interest receivable     5,696       5,289       6,251       7.7       -8.9  
Premises and equipment, net     21,050       19,830       14,795       6.2       42.3  
Mortgage servicing rights, net           3,282       2,309       -100.0       -100.0  
Mortgage servicing rights, at fair value     4,046                   100.0       100.0  
Bank-owned life insurance, net     39,570       39,318       38,596       0.6       2.5  
Goodwill and other intangible assets, net     1,180       1,183             -0.3       100.0  
Prepaid expenses and other assets     32,472       25,735       17,103       26.2       89.9  
                                         
Total assets   $ 1,944,282     $ 1,921,081     $ 1,736,293       1.2 %     12.0 %
                                         
Liabilities and Shareholders’ Equity                                        
                                         
Deposits   $ 1,549,414     $ 1,580,580     $ 1,434,807       -2.0 %     8.0 %
Borrowings     145,000       80,000       50,000       81.3       190.0  
Subordinated debt, net     39,250       39,280       39,310       -0.1       -0.2  
Accrued interest payable     13       393       84       -96.7       -84.5  
Accrued expenses and other liabilities     30,691       29,240       27,994       5.0       9.6  
Advances from borrowers for taxes and insurance     2,138       1,108       2,000       93.0       6.9  
                                         
Total liabilities     1,766,506       1,730,601       1,554,195       2.1       13.7  
                                         
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 10,003,622 at March 31, 2022; issued and outstanding 9,972,698 at December 31, 2021; and issued and outstanding 10,195,644 at March 31, 2021     100       100       102       0.0       -2.0  
Additional paid-in capital     96,473       96,132       96,499       0.4       0.0  
Retained earnings     105,546       103,013       94,363       2.5       11.9  
Accumulated other comprehensive (loss) income, net of tax     (15,153 )     288       199       -5,361.5       -7,714.6  
Unearned employee stock ownership plan (ESOP) shares     (8,407 )     (8,572 )     (9,065 )     1.9       7.3  
                                         
Total parent’s shareholders’ equity     178,559       190,961       182,098       -6.5       -1.9  
Noncontrolling interest in Quin Ventures, Inc.     (783 )     (481 )           -62.8       100.0  
                                         
Total shareholders’ equity     177,776       190,480       182,098       -6.7       -2.4  
                                         
Total liabilities and shareholders’ equity   $ 1,944,282     $ 1,921,081     $ 1,736,293       1.2 %     12.0 %
 
 

FIRST NORTHWEST BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data) (Unaudited)

    Quarter Ended                  
    March 31,
2022
    December 31,
2021
    March 31,
2021
    Three Month
Change
    One Year
Change
 
INTEREST INCOME                                        
Interest and fees on loans receivable   $ 14,536     $ 15,041     $ 12,541       -3.4 %     15.9 %
Interest on investment securities     2,275       2,073       2,034       9.7       11.8  
Interest on deposits in banks     38       37       13       2.7       192.3  
FHLB dividends     52       58       45       -10.3       15.6  
Total interest income     16,901       17,209       14,633       -1.8       15.5  
                                         
INTEREST EXPENSE                                        
Deposits     717       787       934       -8.9       -23.2  
Borrowings     304       214       191       42.1       59.2  
Subordinated debt     394       394       25       0.0       1,476.0  
Total interest expense     1,415       1,395       1,150       1.4       23.0  
                                         
Net interest income     15,486       15,814       13,483       -2.1       14.9  
                                         
(RECAPTURE OF) PROVISION FOR LOAN LOSSES           (150 )     500       100.0       -100.0  
                                         
Net interest income after provision for loan losses     15,486       15,964       12,983       -3.0       19.3  
                                         
NONINTEREST INCOME                                        
Loan and deposit service fees     1,173       1,007       837       16.5       40.1  
Sold loan servicing fees     432       88       30       390.9       1,340.0  
Net gain on sale of loans     253       2,264       1,337       -88.8       -81.1  
Net gain on sale of investment securities     126                   100.0       100.0  
Increase in cash surrender value of bank-owned life insurance     252       238       244       5.9       3.3  
Other income     167       1,179       256       -85.8       -34.8  
Total noninterest income     2,403       4,776       2,704       -49.7       -11.1  
                                         
NONINTEREST EXPENSE                                        
Compensation and benefits     8,803       8,948       7,295       -1.6       20.7  
Data processing     1,772       1,818       1,333       -2.5       32.9  
Occupancy and equipment     1,167       1,173       1,029       -0.5       13.4  
Supplies, postage, and telephone     313       313       242       0.0       29.3  
Regulatory assessments and state taxes     361       316       261       14.2       38.3  
Advertising     752       556       445       35.3       69.0  
Professional fees     559       409       522       36.7       7.1  
FDIC insurance premium     223       302       148       -26.2       50.7  
Other     881       843       819       4.5       7.6  
Total noninterest expense     14,831       14,678       12,094       1.0       22.6  
                                         
INCOME BEFORE PROVISION FOR INCOME TAXES     3,058       6,062       3,593       -49.6       -14.9  
                                         
PROVISION FOR INCOME TAXES     554       1,112       473       -50.2       17.1  
                                         
NET INCOME     2,504       4,950       3,120       -49.4       -19.7  
Net loss on noncontrolling interest in Quin Ventures, Inc.     302       174             73.6       100.0  
                                         
NET INCOME ATTRIBUTABLE TO PARENT   $ 2,806     $ 5,124     $ 3,120       -45.2 %     -10.1 %
                                         
                                         
Basic and diluted earnings per common share   $ 0.30     $ 0.55     $ 0.33       -45.5 %     -9.1 %
                                         
                                         

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  
    March 31,
2022
    December 31,
2021
    September 30,
2021
    June 30,
2021
    March 31,
2021
 
Performance ratios: (1)                                        
Return on average assets     0.60 %     1.09 %     0.92 %     0.69 %     0.76 %
Return on average equity     6.01       10.72       8.69       6.46       6.70  
Average interest rate spread     3.43       3.48       3.46       3.22       3.38  
Net interest margin (2)     3.53       3.58       3.58       3.34       3.48  
Net interest margin – core (2) (4)     3.50       3.51       3.46       3.35       3.51  
Efficiency ratio (3)     82.9       70.5       70.3       78.2       74.7  
Equity to total assets     9.14       9.92       10.16       10.55       10.49  
Average interest-earning assets to average interest-bearing liabilities     132.3       133.8       134.1       133.9       134.6  
Book value per common share   $ 17.77     $ 19.10     $ 18.65     $ 18.49     $ 17.86  
                                         
Tangible performance ratios:                                        
Tangible assets (4)   $ 1,942,151     $ 1,919,028     $ 1,843,395     $ 1,787,389     $ 1,736,292  
Tangible common equity (4)     175,645       188,427       185,702       188,591       182,097  
Tangible common equity ratio (4)     9.04 %     9.82 %     10.07 %     10.55 %     10.49 %
Return on tangible common equity (4)     6.09       10.82       8.73       6.46       6.80  
Tangible book value per common share (4)   $ 17.56     $ 18.89     $ 18.48     $ 18.49     $ 17.86  
                                         
Asset quality ratios:                                        
Nonperforming assets to total assets at end of period (5)     0.06 %     0.07 %     0.06 %     0.10 %     0.12 %
Nonperforming loans to total loans (6)     0.09       0.10       0.09       0.14       0.18  
Allowance for loan losses to nonperforming loans (6)     1226.85       1095.15       1288.50       817.71       668.15  
Allowance for loan losses to total loans     1.10       1.11       1.13       1.16       1.22  
Annualized net charge-offs (recoveries) to average outstanding loans     0.00       (0.01 )     0.01       0.00       0.00  
                                         
Capital ratios (First Fed Bank):                                        
Tier 1 leverage     10.6 %     10.6 %     10.6 %     10.9 %     11.2 %
Common equity Tier 1 capital     13.1       13.8       13.4       14.5       15.1  
Tier 1 risk-based     13.1       13.8       13.4       14.5       15.1  
Total risk-based     14.1       14.9       14.4       15.6       16.3  
                                         
Other Information:                                        
Average total assets   $ 1,899,717     $ 1,864,309     $ 1,810,543     $ 1,737,363     $ 1,645,806  
Average total loans     1,336,175       1,336,937       1,303,199       1,211,348       1,144,230  
Average interest-earning assets     1,777,704       1,750,355       1,702,762       1,639,782       1,549,316  
Average noninterest-bearing deposits     328,304       330,913       314,677       304,483       283,204  
Average interest-bearing deposits     1,221,323       1,211,453       1,179,096       1,133,472       1,092,114  
Average interest-bearing liabilities     1,343,216       1,307,895       1,269,958       1,224,665       1,150,743  
Average equity     189,455       189,706       190,764       186,153       186,171  
Average shares — basic     9,130,168       9,103,640       9,184,568       9,130,113       9,094,354  
Average shares — diluted     9,225,368       9,189,252       9,268,076       9,248,667       9,185,725  
(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:      
       
    March 31,
2022
    December 31,
2021
    March 31,
2021
    Three Month
Change
    One Year
Change
 
    (In thousands)  
Commercial business loans breakout                                        
PPP loans   $ 7,209     $ 14,552     $ 47,928     $ (7,343 )   $ (40,719 )
Northpointe Bank MPP           26,272       5,697       (26,272 )     (5,697 )
Secured lines of credit     11,084       10,376       16,245       708       (5,161 )
Unsecured lines of credit     2,292       3,082       1,130       (790 )     1,162  
SBA loans     4,101       237             3,864       4,101  
Other commercial business loans     29,820       25,319       12,033       4,501       17,787  
Total commercial business loans   $ 54,506     $ 79,838     $ 83,033     $ (25,332 )   $ (28,527 )
                                         
Auto and other consumer loans breakout                                        
Triad Manufactured Home loans   $ 78,222     $ 58,296     $ 26,264     $ 19,926     $ 51,958  
Woodside auto loans     103,524       100,965       85,616       2,559       17,908  
First Help auto loans     7,245       5,752       3,269       1,493       3,976  
Other auto loans     12,201       13,861       20,726       (1,660 )     (8,525 )
Other consumer loans     4,948       3,895       3,259       1,053       1,689  
Total auto and other consumer loans   $ 206,140     $ 182,769     $ 139,134     $ 23,371     $ 67,006  
                                         
Construction and land loans breakout                                        
1-4 Family construction   $ 71,025     $ 68,079     $ 44,568     $ 2,946     $ 26,457  
Multifamily construction     84,448       88,919       42,533       (4,471 )     41,915  
Acquisition-renovation     31,187       51,099       56,876       (19,912 )     (25,689 )
Nonresidential construction     10,819       6,308       2,779       4,511       8,040  
Land and development     11,916       10,304       10,560       1,612       1,356  
Total construction and land loans   $ 209,395     $ 224,709     $ 157,316     $ (15,314 )   $ 52,079  
 

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

Non-GAAP Financial Measures
This press release contains both financial measures based on GAAP and non-GAAP based financial measures, which are used where management believes them to be helpful in understanding the Company’s results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, are included in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, and are not necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Reconciliations of the GAAP and non-GAAP measures are presented below:
Calculations Based on Tangible Common Equity:

    March 31,
2022
    December 31,
2021
    September 30,
2021
    June 30,
2021
    March 31,
2021
 
    (Dollars in thousands, except per share data)  
Total shareholders’ equity   $ 177,776     $ 190,480     $ 187,444     $ 188,593     $ 182,098  
Less: Goodwill and other intangible assets     1,180       1,183       1,186              
Disallowed non-mortgage loan servicing rights     951       870       556       2       1  
Total tangible common equity   $ 175,645     $ 188,427     $ 185,702     $ 188,591     $ 182,097  
                                         
Total assets   $ 1,944,282     $ 1,921,081     $ 1,845,137     $ 1,787,391     $ 1,736,293  
Less: Goodwill and other intangible assets     1,180       1,183       1,186              
Disallowed non-mortgage loan servicing rights     951       870       556       2       1  
Total tangible assets   $ 1,942,151     $ 1,919,028     $ 1,843,395     $ 1,787,389     $ 1,736,292  
                                         
Average shareholders’ equity   $ 189,455     $ 189,706     $ 190,764     $ 186,153     $ 186,171  
Less: Average goodwill and other intangible assets     1,182       1,185       880              
Average disallowed non-mortgage loan servicing rights     1,381       560       8       1       1  
Total average tangible common equity   $ 186,892     $ 187,961     $ 189,876     $ 186,152     $ 186,170  
                                         
Tangible common equity ratio (1)     9.04 %     9.82 %     10.07 %     10.55 %     10.49 %
Net income   $ 2,806     $ 5,124     $ 4,178     $ 2,996     $ 3,120  
Return on tangible common equity (1)     6.09 %     10.82 %     8.73 %     6.46 %     6.80 %
Common shares outstanding     10,003,622       9,972,698       10,050,877       10,205,867       10,195,644  
Tangible book value per common share (1)   $ 17.56     $ 18.89     $ 18.48     $ 18.49     $ 17.86  
GAAP Ratios:                                        
Equity to total assets     9.14 %     9.92 %     10.16 %     10.55 %     10.49 %
Return on average equity     6.01 %     10.72 %     8.69 %     6.46 %     6.70 %
Book value per common share   $ 17.77     $ 19.10     $ 18.65     $ 18.49     $ 17.86  
                                         

Non-GAAP Financial Measures Footnote

(1 We believe these non-GAAP metrics provide an important measure with which to analyze and evaluate financial condition and capital strength. In addition, we believe that use of tangible equity and tangible assets improves the comparability to other institutions that have not engaged in acquisitions that resulted in recorded goodwill and other intangibles.
     

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

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