[10-Q] First Northwest Bancorp Quarterly Earnings Report
First Northwest Bancorp (FNWB) reported a quarterly profit. For the three months ended September 30, 2025, net income was
Year to date, the Company posted a net loss of
Operating cash flow was an outflow of
- None.
- None.
Insights
Return to quarterly profitability, but YTD still negative.
FNWB posted Q3 net income of
Costs weighed on the quarter: noninterest expense rose to
For the nine months, the Company remained in a net loss of
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
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| For the quarterly period ended |
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| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
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| For the transition period from _____ to _____ |
Commission File Number:
FIRST NORTHWEST BANCORP
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(Exact name of registrant as specified in its charter)
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | | ☒ | Emerging growth company | |
| Non-accelerated filer | ☐ | Smaller reporting 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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of October 30, 2025, there were
FIRST NORTHWEST BANCORP
FORM 10-Q
TABLE OF CONTENTS
| PART 1 - FINANCIAL INFORMATION |
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Page |
| Item 1 - Financial Statements (Unaudited) |
3 |
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| Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations |
37 |
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| Item 3 - Quantitative and Qualitative Disclosures About Market Risk |
56 |
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| Item 4 - Controls and Procedures |
56 |
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| PART II - OTHER INFORMATION |
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| Item 1 - Legal Proceedings |
57 |
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| Item 1A - Risk Factors |
57 |
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| Item 2 - Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities |
58 |
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| Item 3 - Defaults Upon Senior Securities |
58 |
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| Item 4 - Mine Safety Disclosures |
58 |
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| Item 5 - Other Information |
58 |
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| Item 6 - Exhibits |
59 |
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| SIGNATURES |
60 |
As used in this report, "First Northwest" refers to First Northwest Bancorp and "First Fed" or the "Bank" refers to First Fed Bank, the wholly owned subsidiary of First Northwest. The terms "we," "our," "us," and "Company" refer to First Northwest together with First Fed, unless the context indicates otherwise.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
FIRST NORTHWEST BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share information) (Unaudited)
| September 30, 2025 | December 31, 2024 | |||||||
| ASSETS | ||||||||
| Cash and due from banks | $ | $ | ||||||
| Interest-earning deposits in banks | ||||||||
| Investment securities available for sale, at fair value (amortized cost of $310,545 and $376,265 at September 30, 2025 and December 31, 2024, respectively) | ||||||||
| Loans held for sale | ||||||||
| Loans receivable (net of allowance for credit losses on loans of $16,203 and $20,449 at September 30, 2025 and December 31, 2024, respectively) | ||||||||
| Federal Home Loan Bank ("FHLB") stock, at cost | ||||||||
| Accrued interest receivable | ||||||||
| Premises and equipment, net | ||||||||
| Servicing rights on sold loans, at fair value | ||||||||
| Bank-owned life insurance ("BOLI"), net | ||||||||
| Equity and partnership investments | ||||||||
| Goodwill and other intangible assets, net | ||||||||
| Deferred tax asset, net | ||||||||
| Right-of-use ("ROU") asset, net | ||||||||
| Prepaid expenses and other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Deposits | $ | $ | ||||||
| Borrowings | ||||||||
| Accrued interest payable | ||||||||
| Lease liability, net | ||||||||
| Accrued expenses and other liabilities | ||||||||
| Advances from borrowers for taxes and insurance | ||||||||
| Total liabilities | ||||||||
| Shareholders' Equity | ||||||||
| Preferred stock, $0.01 par value; 5,000,000 shares authorized; no shares issued or outstanding | ||||||||
| Common stock, $0.01 par value; 75,000,000 shares authorized; 9,462,150 and 9,353,348 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss, net of tax | ( | ) | ( | ) | ||||
| Unearned employee stock ownership plan ("ESOP") shares | ( | ) | ( | ) | ||||
| Total shareholders' equity | ||||||||
| Total liabilities and shareholders' equity | $ | $ | ||||||
See selected notes to the consolidated financial statements.
FIRST NORTHWEST BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data) (Unaudited)
| Three Months Ended |
Nine Months Ended |
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| September 30, |
September 30, |
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| 2025 |
2024 |
2025 |
2024 |
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| INTEREST INCOME |
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| Interest and fees on loans receivable |
$ | $ | $ | $ | ||||||||||||
| Interest on investment securities |
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| Interest on deposits and other |
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| FHLB dividends |
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| Total interest income |
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| INTEREST EXPENSE |
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| Deposits |
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| Borrowings |
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| Total interest expense |
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| Net interest income |
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| PROVISION FOR CREDIT LOSSES |
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| (Recapture of) provision for credit losses on loans |
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| (Recapture of) provision for credit losses on unfunded commitments |
( |
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) | ( |
) | ||||||||||
| (Recapture of) provision for credit losses |
( |
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| Net interest income after (recapture of) provision for credit losses |
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| NONINTEREST INCOME |
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| Loan and deposit service fees |
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| Sold loan servicing fees and servicing rights mark-to-market |
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| Net (loss) gain on sale of loans |
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| Net loss on sale of investment securities |
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| Net gain on sale of premises and equipment |
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| Increase in BOLI cash surrender value |
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| Income from BOLI death benefit, net |
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| Other income |
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| Total noninterest income |
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| NONINTEREST EXPENSE |
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| Compensation and benefits |
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| Data processing |
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| Occupancy and equipment |
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| Supplies, postage, and telephone |
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| Regulatory assessments and state taxes |
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| Advertising |
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| Professional fees |
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| FDIC insurance premium |
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| Other expense |
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| Total noninterest expense |
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| Loss before (benefit) provision for income taxes |
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| (Benefit) provision for income taxes |
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| Net income (loss) |
$ | $ | ( |
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) | $ | ( |
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| Basic and diluted earnings (loss) per common share |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
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See selected notes to the consolidated financial statements.
FIRST NORTHWEST BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands) (Unaudited)
| Three Months Ended |
Nine Months Ended |
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| September 30, |
September 30, |
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| 2025 |
2024 |
2025 |
2024 |
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| Net income (loss) |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
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| Other comprehensive income: |
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| Unrealized holding gains on investments available for sale arising during the period |
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| Tax effect |
( |
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| Amortization of unrecognized defined benefit ("DB") plan prior service cost |
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| Tax effect |
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| Reclassification adjustment for change in fair value of hedged items |
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| Tax effect |
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| Reclassification adjustment for net losses on sales of securities realized in income |
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| Tax effect |
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| Other comprehensive income, net of tax |
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| Comprehensive income |
$ | $ | $ | $ | ||||||||||||
See selected notes to the consolidated financial statements.
FIRST NORTHWEST BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Three Months Ended September 30, 2025 and 2024
(Dollars in thousands, except share information) (Unaudited)
| Common Stock | Additional Paid-in | Retained | Unearned ESOP | Accumulated Other Comprehensive Loss, | Total Shareholders' | |||||||||||||||||||||||
| Shares | Amount | Capital | Earnings | Shares | Net of Tax | Equity | ||||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||
| Common stock repurchased | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Restricted stock award grants net of forfeitures | — | — | ||||||||||||||||||||||||||
| Restricted stock awards canceled | ( | ) | — | ( | ) | ( | ) | |||||||||||||||||||||
| Other comprehensive income, net of tax | ||||||||||||||||||||||||||||
| Share-based compensation expense | ||||||||||||||||||||||||||||
| ESOP shares committed to be released | ( | ) | ||||||||||||||||||||||||||
| Cash dividends declared ($0.07 per share) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||
| Restricted stock award grants net of forfeitures | — | |||||||||||||||||||||||||||
| Restricted stock awards canceled | ( | ) | (1 | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Other comprehensive income, net of tax | ||||||||||||||||||||||||||||
| Share-based compensation expense | ||||||||||||||||||||||||||||
| ESOP shares committed to be released | ( | ) | ||||||||||||||||||||||||||
| Canceled dividends payable on forfeited unvested restricted stock awards | ||||||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
See selected notes to the consolidated financial statements.
FIRST NORTHWEST BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Nine Months Ended September 30, 2025 and 2024
(Dollars in thousands, except share information) (Unaudited)
| Common Stock | Additional Paid-in | Retained | Unearned ESOP | Accumulated Other Comprehensive Loss, | Total Shareholders' | |||||||||||||||||||||||
| Shares | Amount | Capital | Earnings | Shares | Net of Tax | Equity | ||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||
| Common stock repurchased | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Restricted stock award grants net of forfeitures | — | — | ||||||||||||||||||||||||||
| Restricted stock awards canceled | ( | ) | — | ( | ) | ( | ) | |||||||||||||||||||||
| Other comprehensive income, net of tax | ||||||||||||||||||||||||||||
| Share-based compensation expense | ||||||||||||||||||||||||||||
| ESOP shares committed to be released | ( | ) | ||||||||||||||||||||||||||
| Cash dividends declared ($0.21 per share) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||
| Restricted stock award grants net of forfeitures | — | |||||||||||||||||||||||||||
| Restricted stock awards canceled | ( | ) | (1 | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Other comprehensive income, net of tax | ||||||||||||||||||||||||||||
| Share-based compensation expense | ||||||||||||||||||||||||||||
| ESOP shares committed to be released | ( | ) | ||||||||||||||||||||||||||
| Cash dividends declared ($0.14 per share) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
See selected notes to the consolidated financial statements.
| FIRST NORTHWEST BANCORP AND SUBSIDIARY |
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| CONSOLIDATED STATEMENTS OF CASH FLOWS |
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| (In thousands) (Unaudited) |
| Nine Months Ended September 30, |
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| 2025 |
2024 |
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| Cash flows from operating activities: |
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| Net (loss) income |
$ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net income to net cash from operating activities: |
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| Depreciation and amortization |
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| Amortization of core deposit intangible |
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| Amortization and accretion of premiums and discounts on investments, net |
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| Accretion of deferred loan fees and purchased premiums, net |
( |
) | ( |
) | ||||
| Amortization of debt issuance costs |
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| Change in fair value of sold loan servicing rights |
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| Additions to servicing rights on sold loans, net |
( |
) | ( |
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| Provision for credit losses on loans |
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| Recapture of provision for credit losses on unfunded commitments |
( |
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| Allocation of ESOP shares |
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| Share-based compensation expense |
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| Gain on sale of loans, net |
( |
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| Loss on sale of securities available for sale, net |
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| Gain on extinguishment of subordinated debt |
( |
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| Increase in BOLI cash surrender value, net |
( |
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| Income from BOLI death benefit, net |
( |
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| Origination of loans held for sale |
( |
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| Proceeds from sale of loans held for sale |
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| Change in assets and liabilities: |
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| Increase in accrued interest receivable |
( |
) | ( |
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| Decrease (increase) in ROU asset |
( |
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| Increase in prepaid expenses and other assets |
( |
) | ( |
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| Decrease in accrued interest payable |
( |
) | ( |
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| (Decrease) increase in lease liabilities |
( |
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| Decrease in accrued expenses and other liabilities |
( |
) | ( |
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| Net cash (used) provided by operating activities |
( |
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| Cash flows from investing activities: |
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| Purchase of securities available for sale |
( |
) | ( |
) | ||||
| Proceeds from maturities, calls, and principal repayments of securities available for sale |
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| Proceeds from sales of securities available for sale |
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| Redemption (purchase) of FHLB stock |
( |
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| Early surrender of BOLI policies |
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| Purchase of BOLI policies |
( |
) | ( |
) | ||||
| Proceeds from BOLI death benefit |
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| Net decrease (increase) in loans receivable |
( |
) | ||||||
| Proceeds from the sale of premises and equipment |
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| Capital contributions to equity and partnership investments |
( |
) | ( |
) | ||||
| Redemption of partnership investment |
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| Capital contributions to low-income housing tax credit partnerships |
( |
) | ||||||
| Net cash provided (used) by investing activities |
( |
) | ||||||
See selected notes to the consolidated financial statements.
| FIRST NORTHWEST BANCORP AND SUBSIDIARY |
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| CONSOLIDATED STATEMENTS OF CASH FLOWS |
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| (In thousands) (Unaudited) |
| Nine Months Ended September 30, |
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| 2025 |
2024 |
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| Cash flows from financing activities: |
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| Net (decrease) increase in deposits |
$ | ( |
) | $ | ||||
| Proceeds from long-term FHLB advances |
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| Repayment of long-term FHLB advances |
( |
) | ( |
) | ||||
| Net decrease in short-term FHLB advances |
( |
) | ( |
) | ||||
| Redemption of subordinated debt, net |
( |
) | ||||||
| Net increase (decrease) in line of credit |
( |
) | ||||||
| Net increase in advances from borrowers for taxes and insurance |
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| Payment of dividends |
( |
) | ( |
) | ||||
| Restricted stock awards canceled |
( |
) | ( |
) | ||||
| Repurchase of common stock |
( |
) | ||||||
| Net cash (used) provided by financing activities |
( |
) | ||||||
| Net increase (decrease) in cash and cash equivalents |
( |
) | ||||||
| Cash and cash equivalents at beginning of period |
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| Cash and cash equivalents at end of period |
$ | $ | ||||||
| Supplemental disclosures of cash flow information: |
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| Cash paid for interest on deposits and borrowings |
$ | $ | ||||||
| Cash paid for income taxes |
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| Supplemental disclosures of noncash investing activities: |
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| Change in unrealized gain on securities available for sale |
$ | $ | ||||||
| Change in unrealized loss on fair value hedge |
( |
) | ( |
) | ||||
| Amortization of unrecognized DB plan prior service cost |
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| Loan principal transferred from held-for-investment to held-for-sale |
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| Loan principal transferred to real estate owned and repossessed assets, net |
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| Lease liabilities arising from obtaining right-of-use assets |
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| Series A equity investment acquired upon conversion of commercial business loan |
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See selected notes to the consolidated financial statements.
FIRST NORTHWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation and Critical Accounting Policies
Organization and nature of business - First Northwest Bancorp, a Washington corporation ("First Northwest"), became the holding company of First Fed Bank ("First Fed" or the "Bank") on January 29, 2015, upon completion of the Bank's conversion from a mutual to stock form of organization (the "Conversion").
In connection with the Conversion, the Company issued
Pursuant to the Bank's Plan of Conversion (the "Plan") adopted by its Board of Directors, and as approved by its members, the Company established an employee stock ownership plan ("ESOP"). On December 18, 2015, the ESOP completed its open market purchases, with funds borrowed from the Company, of
On October 31, 2021, the Bank converted from a State Savings Bank Charter to a State Commercial Bank Charter and was simultaneously renamed First Fed Bank from First Federal Savings and Loan Association of Port Angeles.
On August 5, 2022, First Northwest's election to be treated as a financial holding company became effective, allowing the Company to engage in activities that are financial in nature or incidental to financial activities.
First Northwest and the Bank are collectively referred to as the "Company."
First Northwest's business activities generally are limited to passive investment activities and oversight of its investment in First Fed. Accordingly, the information set forth in this report, including the consolidated unaudited financial statements and related data, relates primarily to the Bank for balance sheet and income statement related disclosures.
The Bank is a community-oriented financial institution providing commercial and consumer banking services to individuals and businesses in western Washington State with offices in Clallam, Jefferson, Kitsap, King, Snohomish, and Whatcom counties. These services include deposit and lending transactions that are supplemented with borrowing and investing activities.
Basis of presentation - The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). Accordingly, they do not include all the information and footnotes required by U.S. Generally Accepted Accounting Principles ("GAAP") for complete financial statements. These unaudited interim consolidated financial statements should be read in conjunction with our audited consolidated financial statements and accompanying notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024. In our opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the consolidated financial statements in accordance with GAAP have been included. Operating results for the three and nine months ended September 30, 2025, are not necessarily indicative of the results that may be expected for future periods.
Principles of consolidation - The accompanying consolidated financial statements include the accounts of First Northwest and its wholly owned subsidiary, First Fed. All material intercompany accounts and transactions have been eliminated in consolidation.
In March 2024, the FASB issued ASU 2024-01, Compensation—Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards. ASU 2024-01 added an illustrative example to demonstrate how an entity should apply the scope guidance in paragraph 718-10-15-3 to determine whether a profits interest award should be accounted for in accordance with Topic 718. Awards not meeting the criteria should be accounted for in accordance with Topic 710. The illustrative example provides four fact patterns which are intended to reduce complexity in determining whether a profits interest award is subject to the guidance in Topic 718 and reduce existing diversity in practice. ASU 2024-01 is effective for the Company for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years, with early adoption permitted. The adoption of this ASU did not have a material impact on the consolidated financial statements and related disclosures.
Recently issued accounting pronouncements not yet adopted
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 requires additional disclosure of the nature of expenses included in the income statement in response to requests from investors for more information to better understand an entity's performance and potential future cash flows. The new standard requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. ASU 2024-03 is effective for the Company for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years, with early adoption permitted. The adoption of this ASU is not expected to have a material impact on the consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments. ASU 202404 clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. The amendments do not change the accounting for conversions that include the issuance of all equity securities upon conversion. ASU 2024-04 is effective for the Company for fiscal years beginning after December 15, 2025, including interim periods within those fiscal years, with early adoption permitted. The adoption of this ASU is not expected to have a material impact on the consolidated financial statements and related disclosures.
Note 2 - Securities
The amortized cost, gross unrealized gains and losses, and estimated fair value of securities classified as available-for-sale at September 30, 2025 are summarized as follows:
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | Allowance for Credit Losses | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| Available for Sale | ||||||||||||||||||||
| Municipal bonds | $ | $ | $ | ( | ) | $ | $ | |||||||||||||
| U.S. government agency issued asset-backed securities (ABS agency) | ( | ) | ||||||||||||||||||
| Corporate issued asset-backed securities (ABS corporate) | ( | ) | ||||||||||||||||||
| Corporate issued debt securities (Corporate debt) | ( | ) | ||||||||||||||||||
| U.S. Small Business Administration securities (SBA) | ( | ) | ||||||||||||||||||
| Mortgage-backed securities: | ||||||||||||||||||||
| U.S. government agency issued mortgage-backed securities (MBS agency) | ( | ) | ||||||||||||||||||
| Non-agency issued mortgage-backed securities (MBS non-agency) | ( | ) | ||||||||||||||||||
| Total securities available for sale | $ | $ | $ | ( | ) | $ | $ | |||||||||||||
The amortized cost, gross unrealized gains and losses, and estimated fair value of securities classified as available-for-sale at December 31, 2024, are summarized as follows:
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | Allowance for Credit Losses | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| Available for Sale | ||||||||||||||||||||
| Municipal bonds | $ | $ | $ | ( | ) | $ | $ | |||||||||||||
| ABS agency | ( | ) | ||||||||||||||||||
| ABS corporate | ( | ) | ||||||||||||||||||
| Corporate debt | ( | ) | ||||||||||||||||||
| SBA | ( | ) | ||||||||||||||||||
| Mortgage-backed securities: | ||||||||||||||||||||
| MBS agency | ( | ) | ||||||||||||||||||
| MBS non-agency | ( | ) | ||||||||||||||||||
| Total securities available for sale | $ | $ | $ | ( | ) | $ | $ | |||||||||||||
There were
Accrued interest receivable on available-for-sale debt securities totaled $
The following shows the unrealized gross losses and fair value of the investment portfolio by length of time that individual securities in each category have been in a continuous loss position as of September 30, 2025:
| Less Than Twelve Months | Twelve Months or Longer | Total | ||||||||||||||||||||||
| Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
| Available for Sale | ||||||||||||||||||||||||
| Municipal bonds | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||
| ABS agency | ( | ) | ( | ) | ||||||||||||||||||||
| ABS corporate | ( | ) | ( | ) | ||||||||||||||||||||
| Corporate debt | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| SBA | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Mortgage-backed securities: | ||||||||||||||||||||||||
| MBS agency | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| MBS non-agency | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Total available-for-sale in a loss position | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||
The following shows the unrealized gross losses and fair value of the investment portfolio by length of time that individual securities in each category have been in a continuous loss position as of December 31, 2024:
| Less Than Twelve Months | Twelve Months or Longer | Total | ||||||||||||||||||||||
| Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
| Available for Sale | ||||||||||||||||||||||||
| Municipal bonds | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||
| ABS agency | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| ABS corporate | ( | ) | ( | ) | ||||||||||||||||||||
| Corporate debt | ( | ) | ( | ) | ||||||||||||||||||||
| SBA | ( | ) | ( | ) | ||||||||||||||||||||
| Mortgage-backed securities: | ||||||||||||||||||||||||
| MBS agency | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| MBS non-agency | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Total available-for-sale in a loss position | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||
There were
The amortized cost and estimated fair value of investment securities by contractual maturity are shown in the following tables at the dates indicated. Expected maturities of mortgage-backed securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties; therefore, these securities are shown separately.
| September 30, 2025 | ||||||||
| Available-for-Sale | ||||||||
| Amortized Cost | Estimated Fair Value | |||||||
| (In thousands) | ||||||||
| Mortgage-backed securities: | ||||||||
| Due within one year | $ | $ | ||||||
| Due after one through five years | ||||||||
| Due after five through ten years | ||||||||
| Due after ten years | ||||||||
| Total mortgage-backed securities | ||||||||
| All other investment securities: | ||||||||
| Due within one year | ||||||||
| Due after one through five years | ||||||||
| Due after five through ten years | ||||||||
| Due after ten years | ||||||||
| Total all other investment securities | ||||||||
| Total investment securities | $ | $ | ||||||
| December 31, 2024 | ||||||||
| Available-for-Sale | ||||||||
| Amortized Cost | Estimated Fair Value | |||||||
| (In thousands) | ||||||||
| Mortgage-backed securities: | ||||||||
| Due within one year | $ | $ | ||||||
| Due after one through five years | ||||||||
| Due after five through ten years | ||||||||
| Due after ten years | ||||||||
| Total mortgage-backed securities | ||||||||
| All other investment securities: | ||||||||
| Due within one year | ||||||||
| Due after one through five years | ||||||||
| Due after five through ten years | ||||||||
| Due after ten years | ||||||||
| Total all other investment securities | ||||||||
| Total investment securities | $ | $ | ||||||
Note 3 - Loans Receivable
The Company has identified three segments of its loan portfolio that reflect the structure of the lending function, the Company's strategic plan and the manner in which management monitors performance and credit quality. The three loan portfolio segments are: Real Estate Loans, Consumer Loans and Commercial Business Loans. These segments are further disaggregated into classes based on similar attributes and risk characteristics.
Loan amounts are presented at amortized cost which is comprised of the loan balance net of unearned loan fees in excess of unamortized costs and unamortized purchase premiums of $
The amortized cost of loans receivable, net of the allowance for credit losses on loans ("ACLL"), consisted of the following at the dates indicated:
| September 30, 2025 | December 31, 2024 | |||||||
| (In thousands) | ||||||||
| Real Estate: | ||||||||
| One-to-four family | $ | $ | ||||||
| Multi-family | ||||||||
| Commercial real estate | ||||||||
| Construction and land | ||||||||
| Total real estate loans | ||||||||
| Consumer: | ||||||||
| Home equity | ||||||||
| Auto and other consumer | ||||||||
| Total consumer loans | ||||||||
| Commercial business loans | ||||||||
| Total loans receivable | ||||||||
| Less: | ||||||||
| Derivative basis adjustment | ( | ) | ||||||
| Allowance for credit losses on loans | ||||||||
| Total loans receivable, net | $ | $ | ||||||
Nonaccrual Loans. The accrual of interest on loans is discontinued at the time the loan is 90 days delinquent unless the credit is well-secured and in process of collection. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful. All interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income. The interest on these loans is accounted for on either the cash basis or cost recovery method until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. For those loans placed on nonaccrual status due to payment delinquency, return to accrual status will generally not occur until the borrower demonstrates repayment ability over a period of not less than six months.
The following table presents the amortized cost of nonaccrual loans by class of loan at the dates indicated:
| September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||
| Nonaccrual Loans with ACLL | Nonaccrual Loans with No ACLL | Total Nonaccrual Loans | Nonaccrual Loans with ACLL | Nonaccrual Loans with No ACLL | Total Nonaccrual Loans | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
| One-to-four family | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Commercial real estate | ||||||||||||||||||||||||
| Construction and land | ||||||||||||||||||||||||
| Home equity | ||||||||||||||||||||||||
| Auto and other consumer | ||||||||||||||||||||||||
| Commercial business | ||||||||||||||||||||||||
| Total nonaccrual loans | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Interest income recognized on a cash basis on nonaccrual loans for the three months ended September 30, 2025 and 2024, was $
Past due loans. Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. There were no loans past due 90 days or more and still accruing interest at September 30, 2025 and December 31, 2024.
The following tables present the amortized cost of past due loans (including both accruing and nonaccruing loans) by segment and class as of the periods shown:
| 30-59 Days | 60-89 Days | 90 Days or More | Total | |||||||||||||||||||||
| September 30, 2025 | Past Due | Past Due | Past Due | Past Due | Current | Total Loans | ||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
| Real Estate: | ||||||||||||||||||||||||
| One-to-four family | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Multi-family | ||||||||||||||||||||||||
| Commercial real estate | ||||||||||||||||||||||||
| Construction and land | ||||||||||||||||||||||||
| Total real estate loans | ||||||||||||||||||||||||
| Consumer: | ||||||||||||||||||||||||
| Home equity | ||||||||||||||||||||||||
| Auto and other consumer | ||||||||||||||||||||||||
| Total consumer loans | ||||||||||||||||||||||||
| Commercial business loans | ||||||||||||||||||||||||
| Total loans | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| 30-59 Days | 60-89 Days | 90 Days or More | Total | |||||||||||||||||||||
| December 31, 2024 | Past Due | Past Due | Past Due | Past Due | Current | Total Loans | ||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
| Real Estate: | ||||||||||||||||||||||||
| One-to-four family | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Multi-family | ||||||||||||||||||||||||
| Commercial real estate | ||||||||||||||||||||||||
| Construction and land | ||||||||||||||||||||||||
| Total real estate loans | ||||||||||||||||||||||||
| Consumer: | ||||||||||||||||||||||||
| Home equity | ||||||||||||||||||||||||
| Auto and other consumer | ||||||||||||||||||||||||
| Total consumer loans | ||||||||||||||||||||||||
| Commercial business loans | ||||||||||||||||||||||||
| Total loans | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Credit quality indicator. Federal regulations provide for the classification of lower quality loans and other assets, such as debt and equity securities, as substandard, doubtful, or loss; risk ratings 6, 7, and 8 in our 8-point risk rating system, respectively. An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the borrower or of any collateral pledged. Substandard assets include those characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Assets classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses present make collection or liquidation in full highly questionable and improbable, on the basis of currently existing facts, conditions, and values. Assets classified as loss are those considered uncollectible and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted.
When First Fed classifies problem assets as either substandard or doubtful, it may choose to individually evaluate the expected credit loss or may determine that the characteristics are not significantly different from those in pooled loan analysis. The Company evaluates individual loans for expected credit losses when those loans do not share similar risk characteristics with loans evaluated using a collective (pooled) basis. When an insured institution classifies problem assets as a loss, it is required to charge off such assets in the period in which they are deemed uncollectible. Assets that do not currently expose First Fed to sufficient risk to warrant classification as substandard or doubtful but possess identified weaknesses are designated as either watch or special mention assets; risk ratings 4 and 5 in our risk rating system, respectively. Loans not otherwise classified are considered pass graded loans and are rated 1-3 in our risk rating system.
The following table presents the amortized cost of loans receivable by internally assigned risk grade and class of loans as of September 30, 2025, as well as gross charge-off activity for the nine months ended September 30, 2025. Term loans that are renewed or extended for periods longer than 90 days are presented as a new origination in the year of most recent renewal or extension.
| Term Loans by Year of Origination or Most Recent Renewal or Extension (1) | Revolving | Total | ||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Loans | Loans | |||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||
| One-to-four family | ||||||||||||||||||||||||||||||||
| Pass (Grades 1-3) | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Watch (Grade 4) | ||||||||||||||||||||||||||||||||
| Special Mention (Grade 5) | ||||||||||||||||||||||||||||||||
| Substandard (Grade 6) | ||||||||||||||||||||||||||||||||
| Total one-to-four family | ||||||||||||||||||||||||||||||||
| Gross charge-offs year-to-date | ||||||||||||||||||||||||||||||||
| Multi-family | ||||||||||||||||||||||||||||||||
| Pass (Grades 1-3) | ||||||||||||||||||||||||||||||||
| Watch (Grade 4) | ||||||||||||||||||||||||||||||||
| Special Mention (Grade 5) | ||||||||||||||||||||||||||||||||
| Total multi-family | ||||||||||||||||||||||||||||||||
| Gross charge-offs year-to-date | ||||||||||||||||||||||||||||||||
| Commercial Real Estate | ||||||||||||||||||||||||||||||||
| Pass (Grades 1-3) | ||||||||||||||||||||||||||||||||
| Watch (Grade 4) | ||||||||||||||||||||||||||||||||
| Special Mention (Grade 5) | ||||||||||||||||||||||||||||||||
| Substandard (Grade 6) | ||||||||||||||||||||||||||||||||
| Total commercial real estate | ||||||||||||||||||||||||||||||||
| Gross charge-offs year-to-date | ||||||||||||||||||||||||||||||||
| Construction and Land | ||||||||||||||||||||||||||||||||
| Pass (Grades 1-3) | ||||||||||||||||||||||||||||||||
| Watch (Grade 4) | ||||||||||||||||||||||||||||||||
| Special Mention (Grade 5) | ||||||||||||||||||||||||||||||||
| Substandard (Grade 6) | ||||||||||||||||||||||||||||||||
| Total construction and land | ||||||||||||||||||||||||||||||||
| Gross charge-offs year-to-date | ||||||||||||||||||||||||||||||||
| Home Equity | ||||||||||||||||||||||||||||||||
| Pass (Grades 1-3) | ||||||||||||||||||||||||||||||||
| Watch (Grade 4) | ||||||||||||||||||||||||||||||||
| Special Mention (Grade 5) | ||||||||||||||||||||||||||||||||
| Substandard (Grade 6) | ||||||||||||||||||||||||||||||||
| Total home equity | ||||||||||||||||||||||||||||||||
| Gross charge-offs year-to-date | ||||||||||||||||||||||||||||||||
| Auto and Other Consumer | ||||||||||||||||||||||||||||||||
| Pass (Grades 1-3) | ||||||||||||||||||||||||||||||||
| Watch (Grade 4) | ||||||||||||||||||||||||||||||||
| Special Mention (Grade 5) | ||||||||||||||||||||||||||||||||
| Substandard (Grade 6) | ||||||||||||||||||||||||||||||||
| Total auto and other consumer | ||||||||||||||||||||||||||||||||
| Gross charge-offs year-to-date | ||||||||||||||||||||||||||||||||
| Commercial business | ||||||||||||||||||||||||||||||||
| Pass (Grades 1-3) | ||||||||||||||||||||||||||||||||
| Watch (Grade 4) | ||||||||||||||||||||||||||||||||
| Special Mention (Grade 5) | ||||||||||||||||||||||||||||||||
| Substandard (Grade 6) | ||||||||||||||||||||||||||||||||
| Total commercial business | ||||||||||||||||||||||||||||||||
| Gross charge-offs year-to-date | ||||||||||||||||||||||||||||||||
| Total loans | ||||||||||||||||||||||||||||||||
| Pass (Grades 1-3) | ||||||||||||||||||||||||||||||||
| Watch (Grade 4) | ||||||||||||||||||||||||||||||||
| Special Mention (Grade 5) | ||||||||||||||||||||||||||||||||
| Substandard (Grade 6) | ||||||||||||||||||||||||||||||||
| Total loans | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Total gross charge-offs year-to-date | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
(1) Term loans that are renewed or extended for periods longer than 90 days are presented as a new origination in the year of most recent renewal or extension.
The following table presents the amortized cost of loans receivable by internally assigned risk grade and class of loans as of December 31, 2024, as well as gross charge-off activity for the year then ended. Term loans that are renewed or extended for periods longer than 90 days are presented as a new origination in the year of most recent renewal or extension.
| Term Loans by Year of Origination or Most Recent Renewal or Extension (1) | Revolving | Total | ||||||||||||||||||||||||||||||
| 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Loans | Loans | |||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||
| One-to-four family | ||||||||||||||||||||||||||||||||
| Pass (Grades 1-3) | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Watch (Grade 4) | ||||||||||||||||||||||||||||||||
| Special Mention (Grade 5) | ||||||||||||||||||||||||||||||||
| Substandard (Grade 6) | ||||||||||||||||||||||||||||||||
| Total one-to-four family | ||||||||||||||||||||||||||||||||
| Gross charge-offs for the year | ||||||||||||||||||||||||||||||||
| Multi-family | ||||||||||||||||||||||||||||||||
| Pass (Grades 1-3) | ||||||||||||||||||||||||||||||||
| Watch (Grade 4) | ||||||||||||||||||||||||||||||||
| Special Mention (Grade 5) | ||||||||||||||||||||||||||||||||
| Total multi-family | ||||||||||||||||||||||||||||||||
| Gross charge-offs for the year | ||||||||||||||||||||||||||||||||
| Commercial Real Estate | ||||||||||||||||||||||||||||||||
| Pass (Grades 1-3) | ||||||||||||||||||||||||||||||||
| Watch (Grade 4) | ||||||||||||||||||||||||||||||||
| Special Mention (Grade 5) | ||||||||||||||||||||||||||||||||
| Substandard (Grade 6) | ||||||||||||||||||||||||||||||||
| Total commercial real estate | ||||||||||||||||||||||||||||||||
| Gross charge-offs for the year | ||||||||||||||||||||||||||||||||
| Construction and Land | ||||||||||||||||||||||||||||||||
| Pass (Grades 1-3) | ||||||||||||||||||||||||||||||||
| Watch (Grade 4) | ||||||||||||||||||||||||||||||||
| Substandard (Grade 6) | ||||||||||||||||||||||||||||||||
| Total construction and land | ||||||||||||||||||||||||||||||||
| Gross charge-offs for the year | ||||||||||||||||||||||||||||||||
| Home Equity | ||||||||||||||||||||||||||||||||
| Pass (Grades 1-3) | ||||||||||||||||||||||||||||||||
| Watch (Grade 4) | ||||||||||||||||||||||||||||||||
| Substandard (Grade 6) | ||||||||||||||||||||||||||||||||
| Total home equity | ||||||||||||||||||||||||||||||||
| Gross charge-offs for the year | ||||||||||||||||||||||||||||||||
| Auto and Other Consumer | ||||||||||||||||||||||||||||||||
| Pass (Grades 1-3) | ||||||||||||||||||||||||||||||||
| Watch (Grade 4) | ||||||||||||||||||||||||||||||||
| Special Mention (Grade 5) | ||||||||||||||||||||||||||||||||
| Substandard (Grade 6) | ||||||||||||||||||||||||||||||||
| Total auto and other consumer | ||||||||||||||||||||||||||||||||
| Gross charge-offs for the year | ||||||||||||||||||||||||||||||||
| Commercial business | ||||||||||||||||||||||||||||||||
| Pass (Grades 1-3) | ||||||||||||||||||||||||||||||||
| Watch (Grade 4) | ||||||||||||||||||||||||||||||||
| Special Mention (Grade 5) | ||||||||||||||||||||||||||||||||
| Substandard (Grade 6) | ||||||||||||||||||||||||||||||||
| Total commercial business | ||||||||||||||||||||||||||||||||
| Gross charge-offs for the year | ||||||||||||||||||||||||||||||||
| Total loans | ||||||||||||||||||||||||||||||||
| Pass (Grades 1-3) | ||||||||||||||||||||||||||||||||
| Watch (Grade 4) | ||||||||||||||||||||||||||||||||
| Special Mention (Grade 5) | ||||||||||||||||||||||||||||||||
| Substandard (Grade 6) | ||||||||||||||||||||||||||||||||
| Total loans | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Total Gross charge-offs for the year | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
(1) Term loans that are renewed or extended for periods longer than 90 days are presented as a new origination in the year of most recent renewal or extension.
Individually Evaluated Loans. The Company evaluates loans collectively for purposes of determining the ACLL in accordance with ASC 326 by aggregating loans deemed to possess similar risk characteristics and individually evaluates loans that it believes no longer possess risk characteristics similar to other loans in the portfolio. These loans are typically identified from a substandard or worse internal risk grade, since the specific attributes and risks associated with such loans tend to become unique as the credit deteriorates. Such loans are typically nonperforming, modified loans made to borrowers experiencing financial difficulty, and/or are deemed collateral dependent, where the ultimate repayment of the loan is expected to come from the operation of or eventual sale of the collateral.
Loans that are deemed by management to possess unique risk characteristics are evaluated individually for purposes of determining an appropriate lifetime ACLL. The Company uses a discounted cash flow approach, using the loan’s effective interest rate, for determining the ACL on individually evaluated loans, unless the loan is deemed collateral dependent. Collateral dependent loans are evaluated based on the estimated fair value of the underlying collateral, less estimated costs to sell. The Company may increase or decrease the ACLL for collateral dependent individually evaluated loans based on changes in the estimated expected fair value of the collateral. In cases where the loan is well-secured and the estimated value of the collateral exceeds the amortized cost of the loan, no ACLL is recorded. Changes in the ACLL for all other individually evaluated loans is based substantially on the Company’s evaluation of cash flows expected to be received from such loans.
As of September 30, 2025, $
As of December 31, 2024, $
Collateral Dependent Loans. Loans that have been classified as collateral dependent are loans where substantially all repayment of the loan is expected to come from the operation of or eventual liquidation of the collateral.
The following table summarizes individually evaluated collateral dependent loans by segment and collateral type as of the periods shown:
| Collateral Type | ||||||||||||||||||||||||||||
| September 30, 2025 | Single Family Residence | Condominium | Multi-family | Office Building | Gas Station | Business Assets | Total | |||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||
| One-to-four family | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Commercial real estate | ||||||||||||||||||||||||||||
| Construction and land | ||||||||||||||||||||||||||||
| Commercial business | ||||||||||||||||||||||||||||
| Total collateral dependent loans | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Collateral Type | ||||||||||||||||||||
| December 31, 2024 | Single Family Residence | Condominium | Warehouse | Business Assets | Total | |||||||||||||||
| (In thousands) | ||||||||||||||||||||
| One-to-four family | $ | $ | $ | $ | $ | |||||||||||||||
| Commercial real estate | ||||||||||||||||||||
| Construction and land | ||||||||||||||||||||
| Commercial business | ||||||||||||||||||||
| Total collateral dependent loans | $ | $ | $ | $ | $ | |||||||||||||||
Modified Loans to Troubled Borrowers. Modified loans to troubled borrowers ("MLTB") refer to modifications of loans to borrowers experiencing financial difficulty. A MLTB arises from a modification made to a loan in order to alleviate temporary difficulties in the borrower’s financial condition and/or constraints on the borrower’s ability to repay the loan, and to minimize potential losses to the Company. GAAP requires that certain types of modifications be reported, which consist of the following: principal forgiveness, interest rate reduction, other-than-insignificant payment delay, term extension, or any combination of the foregoing. The ACLL for MLTBs is measured on a collective basis, as with other loans in the loan portfolio, unless management determines that such loans no longer possess risk characteristics similar to others in the loan portfolio. In those instances, the ACLL for a MLTB is determined through individual evaluation.
There were
During the year ended December 31, 2024, there were
Other Real Estate Owned ("OREO"). At September 30, 2025, and December 31, 2024, the Company had $
Note 4 - Allowance for Credit Losses on Loans
The Company maintains an ACLL and an allowance for credit losses on unfunded commitments ("ACLUC") in accordance with ASC 326: Financial Instruments - Credit Losses. ASC 326 requires the Company to recognize estimates for lifetime credit losses on loans and unfunded loan commitments at the time of origination or acquisition. The recognition of credit losses at origination or acquisition represents the Company’s best estimate of lifetime expected credit losses, given the facts and circumstances associated with a particular loan or group of loans with similar risk characteristics. Determining the ACLL involves the use of significant management judgement and estimates, which are subject to change based on management’s ongoing assessment of the credit quality of the loan portfolio and changes in economic forecasts used in the Bank's Current Expected Credit Loss ("CECL") model. The reserve is an estimate based upon factors and trends at the time the financial statements are prepared.
The Company has identified segments of loans with similar risk characteristics for which it then applies one of two loss methodologies. The Company uses a discounted cash flow ("DCF") methodology for most of its segments to calculate the ACLL. For certain segments with smaller portfolios or where data is prohibitive to running a DCF calculation, management has elected to use a Remaining Life methodology. The Company will evaluate individual loans for expected credit losses when those loans do not share similar risk characteristics with loans evaluated using a collective (pooled) basis. The allowance for individually evaluated loans is calculated using the collateral value method, which considers the likely source of repayment as the value of the collateral, less estimated costs to sell, or another method such as the cash flow method, which considers the contractual principal and interest terms and estimated cash flows available from the borrower to satisfy the debt. When the cash flow method is used, cash flows are discounted back by the effective interest rate and compared to the total recorded investment. If the present value of cash flows is less than the total recorded investment, a reserve is calculated.
The following tables detail activity in the allowance for credit losses on loans by class for the periods shown:
| At or For the Three Months Ended September 30, 2025 | ||||||||||||||||||||
| Beginning Balance | Charge-offs | Recoveries | (Recapture of) Provision for Credit Losses | Ending Balance | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| One-to-four family | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Multi-family | ( | ) | ||||||||||||||||||
| Commercial real estate | ( | ) | ||||||||||||||||||
| Construction and land | ( | ) | ||||||||||||||||||
| Home equity | ( | ) | ||||||||||||||||||
| Auto and other consumer | ( | ) | ( | ) | ||||||||||||||||
| Commercial business | ( | ) | ( | ) | ||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||
| At or For the Nine Months Ended September 30, 2025 | ||||||||||||||||||||
| Beginning Balance | Charge-offs | Recoveries | (Recapture of) Provision for Credit Losses | Ending Balance | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| One-to-four family | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Multi-family | ||||||||||||||||||||
| Commercial real estate | ( | ) | ||||||||||||||||||
| Construction and land | ( | ) | ||||||||||||||||||
| Home equity | ||||||||||||||||||||
| Auto and other consumer | ( | ) | ( | ) | ||||||||||||||||
| Commercial business | ( | ) | ||||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
| At or For the Three Months Ended September 30, 2024 | ||||||||||||||||||||
| Beginning Balance | Charge-offs | Recoveries | (Recapture of) Provision for Credit Losses | Ending Balance | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| One-to-four family | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
| Multi-family | ||||||||||||||||||||
| Commercial real estate | ( | ) | ||||||||||||||||||
| Construction and land | ( | ) | ||||||||||||||||||
| Home equity | ( | ) | ||||||||||||||||||
| Auto and other consumer | ( | ) | ||||||||||||||||||
| Commercial business | ( | ) | ||||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
| At or For the Nine Months Ended September 30, 2024 | ||||||||||||||||||||
| Beginning Balance | Charge-offs | Recoveries | Provision for (Recapture of) Credit Losses | Ending Balance | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| One-to-four family | $ | $ | $ | $ | $ | |||||||||||||||
| Multi-family | ||||||||||||||||||||
| Commercial real estate | ( | ) | ||||||||||||||||||
| Construction and land | ( | ) | ||||||||||||||||||
| Home equity | ||||||||||||||||||||
| Auto and other consumer | ( | ) | ||||||||||||||||||
| Commercial business | ( | ) | ||||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
Allowance for Credit Losses on Unfunded Loan Commitments. The Company estimates expected credit losses on unfunded, off-balance sheet commitments over the contractual period in which the Company is exposed to credit risk from a contractual obligation to extend credit, unless the obligation is unconditionally cancellable by the Company. The Company has determined that no allowance is necessary for its home equity line of credit portfolio as it has the contractual ability to unconditionally cancel the available lines of credit. The allowance methodology is similar to the ACLL, but additionally includes an estimate of the future utilization of the commitment as determined by historical commitment utilization. The credit risks associated with the unfunded commitments are consistent with the risks outlined for each loan class. This allowance is recognized in accrued expenses and other liabilities on the Consolidated Balance Sheets and is adjusted as a provision, or recapture of provision, for credit losses on unfunded commitments on the Consolidated Statements of Operations. The allowance for unfunded commitments was $
Note 5 - Deposits
Deposits and weighted-average interest rates at the dates indicated are as follows:
| September 30, 2025 | December 31, 2024 | |||||||||||||||
| Amount | Weighted-Average Interest Rate | Amount | Weighted-Average Interest Rate | |||||||||||||
| (Dollars in thousands) | ||||||||||||||||
| Noninterest-bearing demand deposits | $ | 0.00 | % | $ | 0.00 | % | ||||||||||
| Interest-bearing demand deposits | ||||||||||||||||
| Money market accounts | ||||||||||||||||
| Savings accounts | ||||||||||||||||
| Certificates of deposit, customer | ||||||||||||||||
| Certificates of deposit, brokered | ||||||||||||||||
| Total deposits | $ | $ | ||||||||||||||
The aggregate balance of time deposit accounts, including certificates of deposit, in excess of the Federal Deposit Insurance Corporation ("FDIC") insured limit, currently $250,000, at September 30, 2025 and December 31, 2024, was $
Maturities of certificates at the dates indicated are as follows:
| September 30, 2025 | December 31, 2024 | |||||||
| (In thousands) | ||||||||
| Within one year or less | $ | $ | ||||||
| After one year through two years | ||||||||
| After two years through three years | ||||||||
| After three years through four years | ||||||||
| After four years through five years | ||||||||
| Total certificates of deposit | $ | $ | ||||||
At September 30, 2025 and December 31, 2024, deposits included $
Interest on deposits by type for the periods shown was as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| (In thousands) | ||||||||||||||||
| Demand deposits | $ | $ | $ | $ | ||||||||||||
| Money market accounts | ||||||||||||||||
| Savings accounts | ||||||||||||||||
| Certificates of deposit, customer | ||||||||||||||||
| Certificates of deposit, brokered | ||||||||||||||||
| Total interest expense on deposits | $ | $ | $ | $ | ||||||||||||
Note 6 - Borrowings
First Fed is a member of the FHLB. As a member, First Fed has a committed line of credit of up to
First Fed maintains borrowing arrangements with the FHLB to borrow funds primarily under long-term, fixed-rate advance agreements. First Fed also has overnight borrowings through FHLB which renew daily until paid. First Fed periodically uses fixed-rate advances maturing in less than one year as an alternative source of funds. Available borrowing capacity was $
First Fed also has an established borrowing arrangement with the Federal Reserve Bank of San Francisco ("FRB") to utilize the discount window for short-term borrowing. Available borrowing capacity was $
On March 25, 2021, the Company completed a private placement of $
On May 20, 2022, First Northwest consummated a borrowing arrangement with NexBank for a $
In October 2023, Pacific Coast Bankers Bank ("PCBB") extended a $
The following table sets forth information regarding our borrowings at the end of and during the nine months ended September 30, 2025. The table includes both long- and short-term borrowings.
| FHLB Long-Term Advances | FHLB Overnight Variable-Rate Advances | NexBank Line of Credit | Subordinated Debt, net | |||||||||||||
| (Dollars in thousands) | ||||||||||||||||
| Balance outstanding | $ | $ | $ | $ | ||||||||||||
| Maximum outstanding at any month-end | ||||||||||||||||
| Average monthly outstanding during the period | ||||||||||||||||
| Weighted-average daily interest rates | ||||||||||||||||
| Annual | % | % | % | % | ||||||||||||
| Period End | % | % | % | % | ||||||||||||
| Interest expense during the period | ||||||||||||||||
The amounts by year of maturity and weighted-average interest rate of FHLB long-term, fixed-rate advances at September 30, 2025 are as follows:
| Amount | Weighted- Average Interest Rate | |||||||
| (Dollars in thousands) | ||||||||
| Within one year or less | $ | % | ||||||
| After one year through two years | ||||||||
| After two years through three years | ||||||||
| Total FHLB long-term advances | $ | |||||||
The following table sets forth information regarding our borrowings at the end of and during the year ended December 31, 2024. The table includes both long- and short-term borrowings.
| FHLB Long-Term Advances | FHLB Overnight Variable-Rate Advances | NexBank Line of Credit | Subordinated Debt, net | |||||||||||||
| (Dollars in thousands) | ||||||||||||||||
| Balance outstanding | $ | $ | $ | $ | ||||||||||||
| Maximum outstanding at any month-end | ||||||||||||||||
| Average monthly outstanding during the period | ||||||||||||||||
| Weighted-average daily interest rates | ||||||||||||||||
| Annual | % | % | % | % | ||||||||||||
| Period End | % | % | % | % | ||||||||||||
Note 7 - Income Tax
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. These calculations are based on many complex factors including estimates of the timing of reversals of temporary differences, the interpretation of federal income tax laws, and a determination of the differences between the tax and the financial reporting basis of assets and liabilities. Actual results could differ significantly from the estimates and interpretations used in determining the current and deferred income tax assets and liabilities.
The effective tax rates were
On July 4, 2025, President Trump signed H.R. 1, the "One Big Beautiful Bill Act," into law. This legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the reinstatement of 100% bonus depreciation, while disallowance of other expenses, such as limitations on charitable deductions and meals, may have an unfavorable impact. There was no material impact in the current period, and the Company is currently evaluating the impact on future periods.
Note 8 - Earnings (Loss) per Common Share
The two-class method is used for computing basic and diluted earnings per share. Under the two-class method, EPS is determined for each class of common stock and participating security according to dividends declared and participating rights in undistributed earnings. The Company has issued restricted shares under share-based compensation plans which qualify as participating securities.
The following table presents a reconciliation of the components used to compute basic and diluted earnings per share for the periods shown:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| (In thousands, except share data) | ||||||||||||||||
| Net income: | ||||||||||||||||
| Net income (loss) available to common shareholders | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Dividends and undistributed earnings allocated to participating securities | ( | ) | ( | ) | ||||||||||||
| Earnings (loss) allocated to common shareholders | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Basic: | ||||||||||||||||
| Weighted average common shares outstanding | ||||||||||||||||
| Weighted average unvested restricted stock awards | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Weighted average unallocated ESOP shares | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total basic weighted average common shares outstanding | ||||||||||||||||
| Diluted: | ||||||||||||||||
| Basic weighted average common shares outstanding | ||||||||||||||||
| Dilutive restricted stock awards | ||||||||||||||||
| Total diluted weighted average common shares outstanding | ||||||||||||||||
| Basic earnings (loss) per common share | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Diluted earnings (loss) per common share | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
Potentially dilutive shares are excluded from the computation of EPS if their effect is anti-dilutive. At September 30, 2025 and 2024, antidilutive shares as calculated under the treasury stock method totaled
Note 9 - Employee Benefits
Employee Stock Ownership Plan
In connection with the Conversion, the Company established an ESOP for eligible employees of the Company and the Bank. Employees of the Company and the Bank who have been credited with at least 1,000 hours of service during a
Pursuant to the Plan, the ESOP purchased shares in the open market with funds borrowed from First Northwest. The Bank will make contributions to the ESOP in amounts necessary to amortize the ESOP loan payable to First Northwest over a period of
As shares are committed to be released from collateral, the Company reports compensation expense equal to the average daily market prices of the shares and the shares become outstanding for EPS computations. The compensation expense is accrued monthly throughout the year. Dividends on allocated ESOP shares are recorded as a reduction of retained earnings; dividends on unallocated ESOP shares are recorded as a reduction of debt and accrued interest.
Compensation expense related to the ESOP for the three months ended September 30, 2025 and 2024, was $
Shares issued to the ESOP as of the dates indicated are as follows:
| September 30, 2025 | December 31, 2024 | |||||||
| Allocated shares | ||||||||
| Committed to be released shares | ||||||||
| Unallocated shares | ||||||||
| Total ESOP shares issued | ||||||||
| (Dollars in thousands) | ||||||||
| Fair value of unallocated shares | $ | $ | ||||||
Note 10 - Stock-based Compensation
In May 2020, the Company's shareholders approved the First Northwest Bancorp 2020 Equity Incentive Plan ("2020 EIP"), which provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock shares or restricted stock units, and performance share awards to eligible participants through May 2030. The cost of awards under the 2020 EIP generally is based on the fair value of the awards on their grant date. The maximum number of shares that may be utilized for awards under the 2020 EIP is
As a result of the approval of the 2020 EIP, the First Northwest Bancorp 2015 Equity Incentive Plan (the "2015 EIP") was frozen and no additional awards will be made. As of September 30, 2025, there were
There were
In addition, there were
For the three months ended September 30, 2025 and 2024, total compensation expense for the equity incentive plans was $
For the nine months ended September 30, 2025 and 2024, total compensation expense for the equity incentive plans was $
The following tables provide a summary of changes in non-vested restricted stock awards for the periods shown:
| Three Months Ended September 30, 2025 | Shares | Weighted-Average Grant Date Fair Value | ||||||
| Non-vested at July 1, 2025 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Canceled (1) | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Non-vested at September 30, 2025 | ||||||||
| (1) A surrender of vested stock awards by a participant surrendering the number of shares valued at the current stock price at the vesting date to cover the participant's tax obligation on the vested shares. The surrendered shares are canceled and are unavailable for reissue. | ||||||||
| Nine Months Ended September 30, 2025 | Shares | Weighted-Average Grant Date Fair Value | ||||||
| Non-vested at January 1, 2025 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Canceled (1) | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Non-vested at September 30, 2025 | ||||||||
| (1) A surrender of vested stock awards by a participant surrendering the number of shares valued at the current stock price at the vesting date to cover the participant's tax obligation on the vested shares. The surrendered shares are canceled and are unavailable for reissue. | ||||||||
As of September 30, 2025, there was $
Note 11 - Fair Value Measurements
Fair value is the price to sell an asset or transfer a liability in an orderly transaction between market participants in the Company’s principal market. The Company has established and documented its process for determining the fair values of its assets and liabilities, where applicable. Fair value is based on quoted market prices, when available, for identical or similar assets or liabilities. In the absence of quoted market prices, management determines the fair value of the Company’s assets and liabilities using valuation models or third-party pricing services, both of which rely on market-based parameters when available, such as interest rate yield curves, option volatilities and credit spreads, or unobservable inputs. Unobservable inputs may be based on management’s judgment, assumptions, and estimates related to credit quality, liquidity, interest rates, and other relevant inputs.
Any changes to valuation methodologies are reviewed by management to ensure they are relevant and justified. Valuation methodologies are refined as more market-based data becomes available.
A three-level valuation hierarchy is used in determining fair value that is based on the transparency of the inputs used in the valuation process. The inputs used in determining fair value in each of the three levels of the hierarchy are as follows:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - Either: (i) quoted prices for similar assets or liabilities; (ii) observable inputs, such as interest rates or yield curves; or (iii) inputs derived principally from or corroborated by observable market data.
Level 3 - Unobservable inputs.
The hierarchy gives the highest ranking to Level 1 inputs and the lowest ranking to Level 3 inputs. The level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the overall fair value measurement.
The Company used the following methods to measure fair value on a recurring and nonrecurring basis.
Securities available for sale: Where quoted prices are available in an active market, securities are classified as Level 1. Level 1 instruments include highly liquid government bonds, securities issued by the U.S. Treasury, and exchange-traded equity securities. If quoted prices are not available, management determines fair value using pricing models, quoted prices of similar securities, which are considered Level 2, or discounted cash flows. In certain cases, where there is limited activity in the market for an instrument, assumptions must be made to determine their fair value. Such instruments are classified as Level 3.
Sold loan servicing rights, at fair value: The fair value of sold loan servicing rights is determined through a discounted cash flow analysis, which uses interest rates, prepayment speeds, discount rates, and delinquency rate assumptions as inputs. Servicing rights are classified as Level 3 due to reliance on assumptions used in the valuation.
Interest rate swap derivative: The fair values of interest rate swap agreements are based on valuation models using observable market data as of the measurement date (Level 2). The Company’s securities derivatives are traded in an over-the-counter market where quoted market prices are not always available. The Company also entered into pay-fixed and receive-floating interest rate swaps associated with certain fixed rate loans. The fair values of derivatives are determined using quantitative models that utilize multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices and indices to generate continuous yield or pricing curves, prepayment rates, and volatility factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources, including market transactions and third-party pricing services. The fair values of all interest rate swaps are determined from third-party pricing services without adjustment.
Assets and liabilities measured at fair value on a recurring basis - Assets and liabilities are considered to be valued on a recurring basis if fair value is measured regularly (i.e., daily, weekly, monthly, or quarterly). The following tables show the Company’s assets and liabilities measured at fair value on a recurring basis at the dates indicated:
| September 30, 2025 | ||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets or Liabilities | Significant Other Observable Inputs | Significant Unobservable Inputs | ||||||||||||||
| (Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
| Financial Assets | (In thousands) | |||||||||||||||
| Securities available-for-sale | ||||||||||||||||
| Municipal bonds | $ | $ | $ | $ | ||||||||||||
| ABS agency | ||||||||||||||||
| ABS corporate | ||||||||||||||||
| Corporate debt | ||||||||||||||||
| SBA | ||||||||||||||||
| MBS agency | ||||||||||||||||
| MBS non-agency | ||||||||||||||||
| Sold loan servicing rights | ||||||||||||||||
| Total assets measured at fair value | $ | $ | $ | $ | ||||||||||||
| Financial Liabilities | ||||||||||||||||
| Interest rate swap derivative | $ | $ | $ | $ | ||||||||||||
| December 31, 2024 | ||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets or Liabilities | Significant Other Observable Inputs | Significant Unobservable Inputs | ||||||||||||||
| (Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
| Financial Assets | (In thousands) | |||||||||||||||
| Securities available-for-sale | ||||||||||||||||
| Municipal bonds | $ | $ | $ | $ | ||||||||||||
| ABS agency | ||||||||||||||||
| ABS corporate | ||||||||||||||||
| Corporate debt | ||||||||||||||||
| SBA | ||||||||||||||||
| MBS agency | ||||||||||||||||
| MBS non-agency | ||||||||||||||||
| Sold loan servicing rights | ||||||||||||||||
| Interest rate swap derivative | ||||||||||||||||
| Total assets measured at fair value | $ | $ | $ | $ | ||||||||||||
| Financial Liabilities | ||||||||||||||||
| Interest rate swap derivative | $ | $ | $ | $ | ||||||||||||
The following tables provide a description of the valuation technique, unobservable input, and qualitative information about the unobservable inputs for the Company's assets and liabilities classified as Level 3 and measured at fair value on a recurring basis at the dates indicated:
| September 30, 2025 | Fair Value (In thousands) | Valuation Technique | Unobservable Input (1) | Range (Weighted Average) | |||||||
| Sold loan servicing rights | $ | Discounted cash flow | Constant prepayment rate | 4.66% - 36.91% (6.40%) | |||||||
| Discount rate | 10.50% - 12.62% (11.09%) | ||||||||||
| MBS non-agency | $ | Consensus pricing | Offered quotes | | |||||||
| (1) Unobservable inputs were weighted by the relative fair value of the instruments. | |||||||||||
| December 31, 2024 | Fair Value (In thousands) | Valuation Technique | Unobservable Input (1) | Range (Weighted Average) | |||||||
| Sold loan servicing rights | $ | Discounted cash flow | Constant prepayment rate | 5.05% - 29.58% (6.83%) | |||||||
| Discount rate | 11.13% - 13.52% (11.78%) | ||||||||||
| MBS non-agency | $ | Consensus pricing | Offered quotes | | |||||||
| (1) Unobservable inputs were weighted by the relative fair value of the instruments. | |||||||||||
The following tables summarize the changes in Level 3 assets measured at fair value on a recurring basis, at the dates indicated:
| As of or For the Three Months Ended September 30, | As of or For the Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Sold loan servicing rights: | (In thousands) | |||||||||||||||
| Balance at beginning of period | $ | $ | $ | $ | ||||||||||||
| Servicing rights that result from transfers and sale of financial assets | ( | ) | ||||||||||||||
| Changes in fair value due to changes in model inputs or assumptions (1) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Balance at end of period | $ | $ | $ | $ | ||||||||||||
| (1) Represents changes due to collection/realization of expected cash flows and curtailments. | ||||||||||||||||
| As of or For the Three Months Ended September 30, | As of or For the Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Securities available for sale: | (In thousands) | |||||||||||||||
| MBS non-agency | ||||||||||||||||
| Balance at beginning of period | $ | $ | $ | $ | ||||||||||||
| Principal payments and maturities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Unrealized Gains | ||||||||||||||||
| Balance at end of period | $ | $ | $ | $ | ||||||||||||
Assets and liabilities measured at fair value on a nonrecurring basis - Assets are considered to be valued on a nonrecurring basis if the fair value measurement of the instrument does not necessarily result in a change in the amount recorded on the consolidated balance sheets. Generally, nonrecurring valuation is the result of the application of other accounting pronouncements that require assets or liabilities to be assessed for impairment or recorded at the lower of cost or fair value.
The following tables present the Company’s assets measured at fair value on a nonrecurring basis at the dates indicated:
| September 30, 2025 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| (In thousands) | ||||||||||||||||
| Individually evaluated collateral dependent loans | $ | $ | $ | $ | ||||||||||||
| Other real estate owned | ||||||||||||||||
| December 31, 2024 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| (In thousands) | ||||||||||||||||
| Individually evaluated collateral dependent loans | $ | $ | $ | $ | ||||||||||||
At September 30, 2025 and December 31, 2024, there were no individually evaluated loans with discounts to appraisal disposition value or other unobservable inputs.
The following tables present the carrying value and estimated fair value of financial instruments at the dates indicated:
| September 30, 2025 | ||||||||||||||||||||
| Fair Value Measurements Using: | ||||||||||||||||||||
| Carrying Amount | Estimated Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| Financial assets | ||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | |||||||||||||||
| Investment securities available for sale | ||||||||||||||||||||
| Loans held for sale | ||||||||||||||||||||
| Loans receivable, net | ||||||||||||||||||||
| FHLB stock | ||||||||||||||||||||
| Accrued interest receivable | ||||||||||||||||||||
| Sold loan servicing rights, at fair value | ||||||||||||||||||||
| Financial liabilities | ||||||||||||||||||||
| Demand deposits | $ | $ | $ | $ | $ | |||||||||||||||
| Time deposits | ||||||||||||||||||||
| FHLB Borrowings | ||||||||||||||||||||
| Line of Credit | ||||||||||||||||||||
| Subordinated debt, net | ||||||||||||||||||||
| Accrued interest payable | ||||||||||||||||||||
| Interest rate swap derivative | ||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||
| Fair Value Measurements Using: | ||||||||||||||||||||
| Carrying Amount | Estimated Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| Financial assets | ||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | |||||||||||||||
| Investment securities available for sale | ||||||||||||||||||||
| Loans held for sale | ||||||||||||||||||||
| Loans receivable, net | ||||||||||||||||||||
| FHLB stock | ||||||||||||||||||||
| Accrued interest receivable | ||||||||||||||||||||
| Sold loan servicing rights, at fair value | ||||||||||||||||||||
| Interest rate swap derivative | ||||||||||||||||||||
| Financial liabilities | ||||||||||||||||||||
| Demand deposits | $ | $ | $ | $ | ||||||||||||||||
| Time deposits | ||||||||||||||||||||
| FHLB Borrowings | ||||||||||||||||||||
| Line of Credit | ||||||||||||||||||||
| Subordinated debt, net | ||||||||||||||||||||
| Accrued interest payable | ||||||||||||||||||||
| Interest rate swap derivative | ||||||||||||||||||||
Note 12- Change in Accumulated Other Comprehensive Income ("AOCI")
Our AOCI includes unrealized gains (losses) on available-for-sale securities, defined benefit plan assets and derivatives as well as an unrecognized defined benefit plan prior service cost. The following table presents changes to accumulated other comprehensive income after-tax for the periods shown:
| Unrealized Gains and Losses on Available-for-Sale Securities |
Net Actuarial Gains (Losses) on DB Plan Assets |
Unrecognized DB Plan Prior Service Cost, Net of Amortization |
Unrealized Gains (Losses) on Fair Value of Hedged Items |
Total |
||||||||||||||||
| (In thousands) |
||||||||||||||||||||
| Balance at June 30, 2024 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | |||||||
| Other comprehensive income before reclassification |
||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income |
( |
) | ( |
) | ||||||||||||||||
| Net other comprehensive income (loss) |
( |
) | ||||||||||||||||||
| Balance at September 30, 2024 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||
| Balance at June 30, 2025 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||
| Other comprehensive income before reclassification |
||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income |
||||||||||||||||||||
| Net other comprehensive income |
||||||||||||||||||||
| Balance at September 30, 2025 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||
| Unrealized Gains and Losses on Available-for-Sale Securities |
Net Actuarial Gains (Losses) on DB Plan Assets |
Unrecognized DB Plan Prior Service Cost, Net of Amortization |
Unrealized Losses on Fair Value of Hedged Items |
Total |
||||||||||||||||
| (In thousands) |
||||||||||||||||||||
| Balance at December 31, 2023 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||
| Other comprehensive income before reclassification |
||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income |
( |
) | ||||||||||||||||||
| Net other comprehensive income (loss) |
( |
) | ||||||||||||||||||
| Balance at September 30, 2024 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||
| Balance at December 31, 2024 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||
| Other comprehensive income before reclassification |
||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income |
( |
) | ( |
) | ||||||||||||||||
| Net other comprehensive income (loss) |
( |
) | ||||||||||||||||||
| Balance at September 30, 2025 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||
Note 13 - Derivatives and Hedging Activities
The Company is exposed to certain risk arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates.
Fair Value Hedges of Interest Rate Risk
The Company is exposed to changes in the fair value of certain of its fixed-rate assets due to changes in benchmark interest rates. The Company uses interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate. Interest rate swaps designated as fair value hedges involve the payment of fixed-rate amounts to a counterparty in exchange for the Company receiving variable-rate payments over the life of the agreement without the exchange of the underlying notional amount.
For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in interest income.
The following amounts were recorded on the balance sheet related to cumulative basis adjustment for fair value hedges for the periods shown.
| Carrying Amount of the Hedged Assets | Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets | |||||||
| (In thousands) | ||||||||
| Line item in the Consolidated Balance Sheets where the hedged item is included: | ||||||||
| September 30, 2025 | ||||||||
| Investment securities (1) | $ | $ | ||||||
| Loans receivable (2) | ||||||||
| Total | $ | $ | ||||||
| December 31, 2024 | ||||||||
| Investment securities (1) | $ | $ | ||||||
| Loans receivable (2) | ( | ) | ||||||
| Total | $ | $ | ||||||
(1) These amounts include the amortized cost basis of a closed portfolio of AFS securities used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolio anticipated to be outstanding for the designated hedged period. At September 30, 2025 and December 31, 2024, the amortized cost basis of the closed portfolio used in this hedging relationship was $
(2) These amounts include the amortized cost basis of a closed portfolio of loans receivable used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolio anticipated to be outstanding for the designated hedged period. At September 30, 2025 and December 31, 2024, the amortized cost basis of the closed portfolio used in this hedging relationship was $
The following table summarizes the Company’s derivative instruments at the date indicated. The Company has master netting agreements with derivative dealers with which it does business, but reflects gross assets and liabilities as “Other assets” and “Other liabilities,” respectively, on the Consolidated Balance Sheets, as follows:
| Fair Value | ||||||||||||
| Notional Amount | Other Assets | Other Liabilities | ||||||||||
| (In thousands) | ||||||||||||
| September 30, 2025 | ||||||||||||
| Fair value hedges: | ||||||||||||
| Interest rate swaps - securities | $ | $ | $ | |||||||||
| Interest rate swaps - loans | ||||||||||||
| December 31, 2024 | ||||||||||||
| Fair value hedges: | ||||||||||||
| Interest rate swaps - securities | $ | $ | — | $ | ||||||||
| Interest rate swaps - loans | — | |||||||||||
The following table summarizes the effect of fair value accounting on the Consolidated Statements of Operations for the periods shown:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| (In thousands) | ||||||||||||||||
| Total amounts recognized in interest on investment securities | $ | $ | $ | $ | ||||||||||||
| Total amounts recognized in interest and fees on loans receivable | ||||||||||||||||
| Net gains (losses) on fair value hedging relationships | ||||||||||||||||
| Interest rate swaps - securities | ||||||||||||||||
| Recognized on hedged items | $ | $ | $ | ( | ) | $ | ||||||||||
| Recognized on derivatives designated as hedging instruments | ( | ) | ( | ) | ( | ) | ||||||||||
| Interest rate swaps - loans | ||||||||||||||||
| Recognized on hedged items | ( | ) | ( | ) | ||||||||||||
| Recognized on derivatives designated as hedging instruments | ( | ) | ( | ) | ||||||||||||
| Net (expense) income recognized on fair value hedges | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
Credit Risk-related Contingent Features
The Company is exposed to credit-related losses in the event of nonperformance by counterparties to hedging instruments. The counterparties to all derivative transactions are major financial institutions with investment grade credit ratings. However, this does not eliminate the Company’s exposure to credit risk with these institutions. This credit risk is limited to the unrealized gains in such contracts should any of these counterparties fail to perform as contracted.
The Company has interest rate swap agreements with its derivative counterparties that contain provisions where if the Company either defaults or fails to maintain its status as a well or adequately capitalized institution, then the Company could be required to terminate the contract or post additional collateral. At September 30, 2025, the Company had derivatives in a net liability position related to these agreements. The Company has minimum collateral posting thresholds with its derivative counterparties and has posted cash of $
As of September 30, 2025, the Company was in compliance with all credit risk-related contingent features. Given the considerations described above, the Company considers the impact of the risk of counterparty default to be immaterial.
Note 14 - Segment Reporting
First Fed is engaged in the business of attracting deposits and providing lending services. Substantially all income is derived from a diverse base of commercial, mortgage, and consumer lending activities and investments. The Company’s activities are considered to be a single industry segment for financial reporting purposes. The chief operating decision maker ("CODM") is comprised of the chief executive officer and the chief financial officer.
The accounting policies of the Bank are the same as those described in the summary of significant accounting policies in Note 1 of the Company's Annual Report on Form 10-K for the year ended December 31, 2024 ("2024 Form 10-K"). The CODM assesses performance for the Bank and decides how to allocate resources based on net income that is reported on the income statement as consolidated net income. The measurement of segment assets is reported on the balance sheet as total consolidated assets.
The CODM uses net income to evaluate income generated from the segment assets (return on assets) in deciding whether to reinvest profits into the Bank or into other parts of the entity, such as to pay dividends or a share repurchase plan. Net income is used to monitor budget versus actual results and assess the performance of the Bank.
The Company generates revenue from interest income, fee income and other noninterest income from investments and services. All operations are based in Washington State. No single customer accounts for more than 10% of total revenue.
Note 15 - Contingencies
In the normal course of business, the Company may have various legal claims and other similar contingent matters outstanding for which a loss may be realized. For these claims, the Company establishes a liability for contingent losses when it is probable that a loss has been incurred and the amount of loss can be reasonably estimated. For claims determined to be reasonably possible but not probable of resulting in a loss, a liability will not be reserved but the amount of loss or a range of possible losses may be disclosed if the amount can be reasonably estimated.
Water Station Management Litigation
As the Company previously disclosed, on August 27, 2024, involuntary bankruptcy proceedings were commenced against Creative Technologies, LLC, Water Station Management, LLC ("Water Station Management") and Refreshing USA, LLC (collectively the "OpCo Debtors"), certain of which were borrowers of the Bank. In addition, on September 5, 2024, Ideal Property Investments LLC ("Ideal" and, together with the OpCo Debtors, the "Debtors"), also a borrower of the Bank, filed a voluntary petition for bankruptcy in the United States Bankruptcy Court for the Eastern District of Washington. On November 8, 2024, Ideal commenced an adversary proceeding in such bankruptcy proceedings against the Bank, seeking to avoid certain transactions with the Bank under a theory of constructive fraudulent transfer or, in the alternative, to recharacterize them (the "Adversary Proceeding").
On July 17, 2025, the Bank, the OpCo Debtors, Ideal and the Joint Official Committee of Unsecured Creditors of the Debtors entered into a Settlement Agreement, Plan Support Agreement and Release (the "Settlement Agreement") to resolve the Adversary Proceeding and any other claims of the parties. Pursuant to the Settlement Agreement, the Bank agreed, in exchange for, among other things, a release of all claims of the parties to the Settlement Agreement, to (i) release certain liens against the property of the Debtors and (ii) make certain cash payments of not less than $
3|5|2 Capital Litigation
On June 10, 2025, 3|5|2 Capital GP LLC, on behalf of 3|5|2 Capital ABS Master Fund LP (collectively, "3|5|2 Capital"), filed a complaint (the "3|5|2 Complaint") against First Fed, in the Superior Court of the State of Washington for King County, arising from 3|5|2 Capital’s alleged investment in bonds of Water Station Management, along with certain affiliated entities, in the United States Bankruptcy Court for the Eastern District of Washington. The 3|5|2 Complaint alleges that Water Station Management and certain affiliated individuals and entities misappropriated over $
Note 16 - Subsequent Event
In October 2025, the Bank received a $
On October 17, 2025, Socotra REIT I, LLC filed a complaint (the "Socotra Complaint") against First Fed, in the Superior Court of the State of Washington for King County. The Socotra Complaint alleges that First Fed made misrepresentations, committed fraudulent acts, converted funds, and violated Washington’s Consumer Protection Act in connection with a $
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
Certain matters discussed in this Quarterly Report on Form 10-Q constitute forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact, are based on certain assumptions and are generally identified by the use of words such as "anticipates," "assumes," "believes," "can," "continues," "could," "estimates," "expects," "forecasts," "goal," "intends," "likely," "may," "might," "objective," "plans," "potential," "projects," "remains," "should," "target," "trend," "will," "would," or similar expressions. Forward-looking statements include, but are not limited to:
| • | statements of our goals, intentions and expectations; |
|
| • | statements regarding our business plans, prospects, growth and operating strategies; |
|
| • | statements regarding the quality of our loan and investment portfolios; |
|
| • | statements regarding litigation; and | |
| • | estimates of our risks and future costs and benefits. |
These forward-looking statements are based on current beliefs and expectations of management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company’s control. Actual results may differ materially from those contemplated by the forward-looking statements due to, among others, the following factors:
| • |
risks associated with lending and potential adverse changes in the credit quality of our loan portfolio; |
|
| • | legislative, regulatory and policy changes; | |
| • | uncertainties relating to litigation; | |
| • |
continued depressed market demand for mortgage and Small Business Administration loans that we originate for sale; |
|
| • | changes in monetary and fiscal policies including interest rate policies of the Federal Reserve and the relative differences between short and long-term interest rates, deposit interest rates, our net interest margin and funding sources; | |
| • |
our ability to control operating costs and expenses; |
|
| • |
whether our management team can succeed in implementing our operational strategy, including but not limited to our efforts to achieve higher net interest income and noninterest revenue growth; |
|
| • |
our ability to successfully execute on growth strategies related to our entry into new markets and delivery channels, including banking as a service; |
|
| • |
our ability to develop user-friendly digital applications to serve existing customers and attract new customers; |
|
| • |
the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; |
|
| • | pressures on liquidity, including as a result of withdrawals of customer deposits or declines in the value of our investment portfolio; | |
| • |
increased competitive pressures among financial services companies, particularly from non-traditional banking entities such as challenger banks, fintech, and mega technology companies; |
|
| • |
our ability to attract and retain deposits at a reasonable cost relative to the market; |
|
| • |
changes in consumer spending, borrowing and savings habits, resulting in reduced demand for banking products and services, particularly in the event of a recession that affects our market areas; |
|
| • |
results of examinations by our primary or other regulatory authorities could have an adverse impact on our business and operations; |
|
| • |
disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on the third-party vendors who perform several of our critical processing functions; |
|
| • | risks related to overall economic conditions, including the impact on the economy of an elevated interest rate environment, geopolitical instability, including the wars in Ukraine and the Middle East, and potential recessionary and other unfavorable conditions and trends relating to housing markets, unemployment levels, interest rates and inflationary pressures; | |
| • |
any failure of key third-party vendors to perform their obligations to us; |
|
| • | risks related to natural disasters, including droughts, fires, floods, earthquakes, pandemics, and other unexpected events; | |
| • | the effects of any reputational damage to the Company resulting from any of the foregoing; and | |
| • |
other economic, competitive, governmental, regulatory and technical factors affecting our operations, pricing, products and services and other risks described elsewhere in our filings with the Securities and Exchange Commission, including this Form 10-Q and the Company's 2024 Form 10-K. |
Any of the forward-looking statements that we make in this report and in other statements we make may turn out to be wrong because of inaccurate assumptions we might make, because of the factors illustrated above or because of other factors that we cannot anticipate or predict. Any forward-looking statements are based upon management’s beliefs and assumptions at the time they are made. We undertake no obligation to publicly update or revise any forward-looking statements included or incorporated by reference in this document or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise. Due to these risks, uncertainties and assumptions, the forward-looking statements discussed in this report might not occur, and you should not put undue reliance on any forward-looking statements.
General
First Northwest, a Washington corporation, is a bank holding company and a financial holding company. First Northwest is engaged in banking activities through its wholly owned subsidiary, First Fed Bank, as well as certain non-banking financial activities. Non-banking investments include several limited partnership investments. The Company's business activities are generally focused on passive investment activities and oversight of the activities of First Fed.
First Fed Bank is a community-oriented commercial bank founded in 1923 in Port Angeles, Washington. The Bank serves Clallam, Jefferson, King, Kitsap, Snohomish and Whatcom counties in Washington State through its twelve full-service branches and five business centers, including our headquarters. We offer a wide range of products and services focused on the lending, deposit and money movement needs of the communities we serve. To diversify our portfolio and increase interest income, we increased our origination of commercial real estate, multi-family real estate, and commercial business loans. We also increased our auto and consumer loans through purchased auto loan programs and purchased manufactured homes. We continue to originate one-to-four family residential mortgage loans, primarily for sale into the secondary market to generate noninterest gain on sale and servicing fee revenue and manage interest rate risk or retain select loans in our portfolio to enhance interest income. Home equity, residential construction and commercial construction loans are also originated primarily in Western Washington. We offer traditional consumer and business deposit products, including transaction accounts, savings and money market accounts and certificates of deposit ("CDs" or "term certificate") for individuals, businesses and nonprofit organizations. Deposits are our primary source of funding for our lending and investing activities. First Fed has a limited partnership investment in the Canapi Ventures SBIC Fund II, LP. First Fed also has a limited partnership investment in the Meriwether Group Capital Hero Fund LP ("Hero Fund") which was previously held by First Northwest. The Hero Fund is a private commercial lender focused on lower-middle market businesses, primarily in the Pacific Northwest.
First Northwest's limited partnership investments include Canapi Ventures Fund, LP; BankTech Ventures, LP; and JAM FINTOP Frontier Fund, LP. These limited partnerships invest in fintech-related businesses with a focus on developing digital solutions applicable to the banking industry. In 2022, First Northwest acquired a 33.3% interest in The Meriwether Group, LLC ("MWG"), a boutique investment bank and consulting firm focused on providing entrepreneurs with resources to help them succeed, including equity and debt raising services. Also in 2022, the Company acquired a 25% equity interest as a general partner in Meriwether Group Capital, LLC ("MWGC"), which provides financial advice for borrowers and capital for the Hero Fund. MWG also holds a 20% general partner interest in MWGC. MWGC holds a 0.01% general partner interest in the Hero Fund.
The Company is impacted by prevailing economic conditions as well as government policies and regulations concerning, among other things, monetary and fiscal policy, including fiscal stimulus, interest rate policy and open market operations, housing, and consumer protection. Deposit flows are influenced by various factors, including changes in market rates; sales and marketing efforts; interest rates paid by competitors; available alternative investments such as money market mutual funds, the stock and bond markets; account maturities; government stimulus and unemployment programs; and the overall level of personal income and savings. Lending activities are influenced by prevailing interest rates and property values in our markets, the demand for funds, the number and quality of lenders employed by First Fed, and both regional and national economic cycles.
Our primary source of pre-tax income is net interest income. Net interest income is interest income earned on our loans and investments less interest expense paid on our deposits and borrowings. Changes in levels of interest rates impact our net interest income. A secondary source of income for the Company is noninterest income, which includes revenue we receive from providing products and services, including service charges on deposit accounts, debit card interchange income, mortgage banking income, treasury and other commercial banking related fees, earnings from bank-owned life insurance, loan servicing income, earnings from equity and partnership investments, and gains and losses from the sale of loans and securities.
An offset to net interest income is the provision for credit losses, which represents the periodic charge to operations required to adequately provide for probable losses inherent in our loan, unfunded commitments and investment portfolios through the ACL. A recapture of previously recognized provision for credit losses may be recorded if forecasted macroeconomic factors improve, underlying balances decrease, or recoveries of amounts previously charged off are received.
Noninterest expenses incurred in operating our business consist of salaries and employee benefit costs, occupancy and equipment expenses, professional fees, deposit insurance premiums and regulatory assessments, digital delivery and data processing expenses, marketing and other customer acquisition expenses, expenses related to real estate and personal property owned, state and local taxes, federal income tax, and other miscellaneous expenses.
Recent Regulatory Developments
On October 24, 2023, the federal banking agencies issued a final rule amending their regulations implementing the Community Reinvestment Act (the "CRA") to substantially revise how they evaluate an insured depository institution’s record of satisfying the credit needs of its entire communities, including low- and moderate-income individuals and neighborhoods. On July 16, 2025, the agencies issued a notice of proposed rulemaking to rescind the October 2023 final rule and restore the CRA framework that existed previously, which has remained in effect due to a preliminary injunction that stayed implementation of the October 2023 rule. The Bank received a rating of "satisfactory" in its most recent performance evaluation, which was conducted using the CRA framework that existed prior to the October 2023 final rule.
On September 17, 2024, the FDIC finalized changes to its Statement of Policy on Bank Merger Transactions (the "2024 Policy Statement"), which outlines factors that the FDIC will consider when evaluating a proposed bank merger transaction. On May 20, 2025, the FDIC rescinded the 2024 Policy Statement and reinstated the Statement of Policy on Bank Merger Transactions that was in effect prior to the 2024 Policy Statement. The United States Department of Justice has left in place its 2023 Merger Guidelines as a framework to review bank mergers and has not reinstated the 1995 Bank Merger Guidelines that it previously applied to bank mergers and which the Federal Reserve continues to apply. Compared to the 1995 Bank Merger Guidelines, the 2023 Merger Guidelines set forth more stringent concentration limits and add several largely qualitative bases on which the DOJ may challenge a merger.
On July 18, 2025, President Trump signed the Guiding and Establishing National Innovation for U.S. Stablecoins Act, or the "GENIUS Act," into law, establishing a federal licensing and supervisory framework for payment stablecoins and their issuers. The GENIUS Act may accelerate and increase the competition that non-traditional financial institutions pose to banks’ payment services, but may also create opportunities for banks to hold stablecoin reserve assets, custody stablecoins, or issue stablecoins. Several key provisions of the GENIUS Act require federal regulatory agencies to adopt implementing regulations, and the Act will take effect the earlier of 18 months after its enactment or 120 days after the agencies issue final implementing regulations.
In July 2025, the FDIC proposed a rule to adjust certain regulatory thresholds to reflect historical inflation and adjust those thresholds in the future based on a proposed indexing methodology. Among other changes, the proposal would increase the total asset size thresholds from $1 billion to $5 billion for an insured depository institution to be subject to the FDIC's requirements for each audit committee member to be independent of management and for management to prepare reports on the effectiveness of the institution’s internal control structure and procedures. The Company is evaluating the potential impact of the proposed rule.
Critical Accounting Policies
There are no material changes to the critical accounting policies from those disclosed in the Company's 2024 Form 10-K.
Comparison of Financial Condition at September 30, 2025 and December 31, 2024
Assets. Total assets decreased to $2.11 billion, or 5.4%, at September 30, 2025, from $2.23 billion at December 31, 2024.
Cash and cash equivalents increased by $6.7 million, or 9.3%, to $79.2 million as of September 30, 2025, compared to $72.5 million as of December 31, 2024.
Investment securities decreased $57.7 million, or 17.0%, to $282.6 million at September 30, 2025, from $340.3 million at December 31, 2024. The decrease was primarily due to maturities and early redemptions totaling $50.9 million and $20.3 of principal payments received. These items were partially offset by purchases totaling $5.5 million and a portfolio market value increase of $8.0 million during the nine months ended September 30, 2025.
The investment portfolio, including mortgage-backed securities, had an estimated projected average life of 6.9 years as of both September 30, 2025 and December 31, 2024, and had an estimated average repricing term of 6.6 years as of September 30, 2025, compared to 5.3 years as of December 31, 2024, based on the interest rate environment at those times. The effective duration of the investment portfolio was 4.8 years at September 30, 2025, compared to 3.9 years at December 31, 2024. The investment portfolio was comprised of 55.6% in amortizing securities at September 30, 2025, compared to 60.2% at December 31, 2024. The projected average life of the securities portfolio may vary due to prepayment activity, particularly in the mortgage-backed securities portfolio, which is impacted by prevailing market interest rates. If prevailing market interest rates fall, we expect prepayments to accelerate due to the current coupons of fixed rate bonds. We utilize our securities portfolio to manage liquidity, improve long-term interest income and manage interest rate risk. For additional information, see Note 2 of the Notes to Consolidated Financial Statements contained in Item 1 of this Form 10-Q.
Net loans, excluding loans held for sale, decreased $67.4 million, or 4.0%, to $1.61 billion at September 30, 2025, from $1.68 billion at December 31, 2024. During the nine months ended September 30, 2025, commercial business loans decreased $38.3 million, including a $36.2 million decrease to our Northpointe Bank Mortgage Purchase Program ("Northpointe MPP") participation, charge-offs totaling $4.8 million and other repayment activity, partially offset by $12.4 million of draws on existing line of credit commitments, $10.7 million of organic originations and $1.5 million of new purchased loans. Multi-family loans decreased $36.3 million during the nine months ended September 30, 2025, as repayments exceeded $5.2 million of construction loans converting into permanent amortizing loans. One-to-four family loans decreased $12.8 million during the nine months ended September 30, 2025, as repayment activity exceeded $9.5 million in residential construction loans that converted to permanent amortizing loans and new loan originations totaling $5.5 million.
Auto and other consumer loans increased $11.4 million with auto loan purchases of $44.2 million, individual manufactured home loan purchases of $7.2 million and manufactured home loan pool purchases of $4.6 million, partially offset by prepayments and scheduled payments. Home equity loan outstanding balances increased $7.6 million over the prior year end due to $18.5 million of net draws on new and existing line of credit commitments and $5.2 million of home equity loan originations, partially offset by prepayments and scheduled payments. Commercial real estate loans increased $6.1 million during the nine months ended September 30, 2025, with $42.0 million of new loan originations and $656,000 of construction loan conversions exceeding loan charge-offs totaling $6.2 million and repayment activity.
Construction and land loans decreased $10.3 million, or 13.2%, to $67.8 million at September 30, 2025, from $78.1 million at December 31, 2024, with payment activity totaling $30.6 million and $15.4 million converting into fully amortizing loans, partially offset by draws on new and existing loan commitments. Construction projects in the portfolio are geographically dispersed throughout Western Washington as well as one project in California. The borrower associated with the California project has a longstanding history with the Bank. All construction projects are monitored by either a third-party firm or our internal construction administration team. Projects with larger loan commitments have more robust monitoring by firms with more services and expertise.
The following tables show our construction commitments by type and geographic concentrations at the dates indicated:
| September 30, 2025 |
North Olympic Peninsula (1) |
Puget Sound Region (2) |
Other Washington |
California |
Total |
|||||||||||||||
| (In thousands) |
||||||||||||||||||||
| Construction Commitment |
||||||||||||||||||||
| One-to-four family residential |
$ | 7,168 | $ | 23,984 | $ | 356 | $ | — | $ | 31,508 | ||||||||||
| Multi-family residential |
3,889 | 21,113 | 3,166 | — | 28,168 | |||||||||||||||
| Commercial real estate |
— | 30,510 | 4,940 | 7,841 | 43,291 | |||||||||||||||
| Total commitment |
$ | 11,057 | $ | 75,607 | $ | 8,462 | $ | 7,841 | $ | 102,967 | ||||||||||
| Construction Funds Disbursed |
||||||||||||||||||||
| One-to-four family residential |
$ | 4,011 | $ | 19,103 | $ | 1 | $ | — | $ | 23,115 | ||||||||||
| Multi-family residential |
2,434 | 11,000 | 2,396 | — | 15,830 | |||||||||||||||
| Commercial real estate |
— | 19,419 | 3,505 | 521 | 23,445 | |||||||||||||||
| Total disbursed for construction |
6,445 | 49,522 | 5,902 | 521 | 62,390 | |||||||||||||||
| Net deferred fees (costs) |
11 | (255 | ) | (13 | ) | (27 | ) | (284 | ) | |||||||||||
| Amortized cost for construction |
$ | 6,456 | $ | 49,267 | $ | 5,889 | $ | 494 | $ | 62,106 | ||||||||||
| Undisbursed Commitment |
||||||||||||||||||||
| One-to-four family residential |
$ | 3,157 | $ | 4,881 | $ | 355 | $ | — | $ | 8,393 | ||||||||||
| Multi-family residential |
1,455 | 10,113 | 770 | — | 12,338 | |||||||||||||||
| Commercial real estate |
— | 11,091 | 1,435 | 7,320 | 19,846 | |||||||||||||||
| Total undisbursed |
$ | 4,612 | $ | 26,085 | $ | 2,560 | $ | 7,320 | $ | 40,577 | ||||||||||
| Land Funds Disbursed |
||||||||||||||||||||
| One-to-four family residential |
$ | 1,978 | $ | 1,814 | $ | 122 | $ | — | $ | 3,914 | ||||||||||
| Commercial real estate |
900 | 845 | — | — | 1,745 | |||||||||||||||
| Total disbursed for land |
2,878 | 2,659 | 122 | — | 5,659 | |||||||||||||||
| Net deferred fees |
19 | 6 | 3 | — | 28 | |||||||||||||||
| Amortized cost for land |
$ | 2,897 | $ | 2,665 | $ | 125 | $ | — | $ | 5,687 | ||||||||||
| (1) Includes Clallam and Jefferson counties. |
| (2) Includes Kitsap, Mason, Thurston, Pierce, King, Snohomish, Skagit, Whatcom, and Island counties. |
| December 31, 2024 |
North Olympic Peninsula (1) |
Puget Sound Region (2) |
Other Washington |
Total |
||||||||||||
| (In thousands) |
||||||||||||||||
| Construction Commitment |
||||||||||||||||
| One-to-four family residential |
$ | 6,897 | $ | 45,945 | $ | 1,424 | $ | 54,266 | ||||||||
| Multi-family residential |
3,900 | 14,828 | 5,695 | 24,423 | ||||||||||||
| Commercial real estate |
500 | 40,259 | 4,215 | 44,974 | ||||||||||||
| Total commitment |
$ | 11,297 | $ | 101,032 | $ | 11,334 | $ | 123,663 | ||||||||
| Construction Funds Disbursed |
||||||||||||||||
| One-to-four family residential |
$ | 1,769 | $ | 35,711 | $ | 1,424 | $ | 38,904 | ||||||||
| Multi-family residential |
709 | 10,245 | 4,582 | 15,536 | ||||||||||||
| Commercial real estate |
99 | 16,508 | 900 | 17,507 | ||||||||||||
| Total disbursed for construction |
2,577 | 62,464 | 6,906 | 71,947 | ||||||||||||
| Net deferred fees (costs) |
2 | (329 | ) | (37 | ) | (364 | ) | |||||||||
| Amortized cost for construction |
$ | 2,579 | $ | 62,135 | $ | 6,869 | $ | 71,583 | ||||||||
| Undisbursed Commitment |
||||||||||||||||
| One-to-four family residential |
$ | 5,128 | $ | 10,234 | $ | — | $ | 15,362 | ||||||||
| Multi-family residential |
3,191 | 4,583 | 1,113 | 8,887 | ||||||||||||
| Commercial real estate |
401 | 23,751 | 3,315 | 27,467 | ||||||||||||
| Total undisbursed |
$ | 8,720 | $ | 38,568 | $ | 4,428 | $ | 51,716 | ||||||||
| Land Funds Disbursed |
||||||||||||||||
| One-to-four family residential |
$ | 2,349 | $ | 2,183 | $ | 213 | $ | 4,745 | ||||||||
| Commercial real estate |
900 | 845 | — | 1,745 | ||||||||||||
| Total disbursed for land |
3,249 | 3,028 | 213 | 6,490 | ||||||||||||
| Net deferred fees |
18 | 14 | 5 | 37 | ||||||||||||
| Amortized cost for land |
$ | 3,267 | $ | 3,042 | $ | 218 | $ | 6,527 | ||||||||
| (1) Includes Clallam and Jefferson counties. |
| (2) Includes Kitsap, Mason, Thurston, Pierce, King, Snohomish, Skagit, Whatcom, and Island counties. |
During the nine months ended September 30, 2025, the Company added $147.6 million of organic loan originations, of which $79.3 million, or 53.7%, were located in the Puget Sound region, $34.0 million, or 23.0%, on the North Olympic Peninsula, $17.0 million, or 11.5%, in other areas throughout Washington State, and $17.3 million, or 11.7%, in other states. The Company purchased an additional $44.2 million in auto loans, $11.8 million in manufactured home loans, $2.1 million in commercial business loans and $550,000 in one-to-four family loans to borrowers located throughout the United States during the nine months ended September 30, 2025. The total loan portfolio was composed of 79.7% organic originations and 20.3% purchased loans at September 30, 2025. We will continue to assess our lending strategies across all product lines and markets where we do business as well as evaluate opportunities to supplement organic growth through wholesale acquisitions with the goal of improving earnings while also prudently managing credit risk.
The ACLL decreased to $16.2 million at September 30, 2025, compared to $20.5 million at December 31, 2024. An individually evaluated commercial business loan which was fully reserved at December 31, 2024, was sold in the second quarter of 2025, resulting in a $1.4 million reduction to the ACLL. A $1.8 million reduction in the pooled loan reserve balance was driven by decreased commercial business loan, one-to-four family, multi-family and other consumer loan balances combined with lower loss factors applied to one-to-four family and other consumer loans. Decreases to the pooled loan reserve balance were partially offset by increases due to higher loss factors applied to commercial business, multi-family, commercial real estate and construction loan balances at the end of the current quarter. The pooled loan reserve was impacted by a mild deterioration in gross domestic product and unemployment forecasts. The ACLL as a percentage of total loans was 1.00% and 1.21% at September 30, 2025 and December 31, 2024, respectively. Management continues to monitor economic conditions for potential weaknesses that could expose the loan portfolio to losses. We believe the ACLL is adequate to cover current expected credit losses in the loan portfolio as of September 30, 2025.
Nonperforming loans decreased $17.1 million, or 56.2%, to $13.4 million at September 30, 2025, from $30.5 million at December 31, 2024, attributable to loan charge-offs totaling $8.7 million, the sale of a $4.9 million commercial construction loan and $4.5 million in payments received on commercial construction loans. Decreases in nonaccrual loans were partially offset by a $4.1 million commercial real estate loan, one-to-four family loans totaling $1.1 million and commercial business loans totaling $524,000 placed on nonaccrual status during the year. The increase in charge-off activity was related to underlying collateral deficiencies in a $6.2 million relationship consisting of two commercial real estate loans and a related commercial business loan charged-off in the first quarter of 2025. A $2.0 million commercial business loan was charged-off in the second quarter of 2025. Nonperforming loans to total loans was 0.82% at September 30, 2025, compared to 1.80% at December 31, 2024. The ACLL as a percentage of nonaccrual loans increased to 121% at September 30, 2025, up from 67% at December 31, 2024.
Classified loans decreased $18.7 million, or 43.9%, to $23.9 million at September 30, 2025, from $42.5 million at December 31, 2024, primarily due to charge-offs totaling $10.0 million, $7.7 million in payments received on commercial construction loans included in this category and the sale of two loans totaling $6.6 million, partially offset by a $4.1 million commercial real estate loan that was adversely impacted by reduced cross-border traffic during the second quarter of 2025. Three collateral dependent loans totaling $16.1 million account for 67.6% of the classified loan balance at September 30, 2025. The Bank has exercised legal remedies, including the appointment of a third-party receiver and foreclosure actions, to liquidate the underlying collateral to satisfy the real estate loans in the largest of these collateral-dependent relationships. The Bank is also closely monitoring a group of commercial business loans that have similar collateral, twelve loans with recorded balances totaling $149,000 were included in classified loans at September 30, 2025, and one $210,000 loan was included in the special mention risk grading category. The Bank continues to work with these borrowers to facilitate satisfactory repayment.
In the first nine months of 2025, the Bank recorded commercial real estate loan charge-offs totaling $5.6 million and commercial business loan charge-offs totaling $603,000 due to underlying collateral deficiencies. Additional commercial business loan charge-offs totaling $4.7 million, commercial construction loan charge-offs totaling $857,000 and commercial real estate loan charge-offs totaling $656,000 were recorded as a result of uncertainty in the collectability of the underlying collateral in specific loan relationships. Charge-offs are based on individual loan evaluations and do not represent a universal decline in the collectability of all loans in these categories. Additional charged-off balances related to purchased unsecured consumer loans totaled $471,000 during the nine months ended September 30, 2025.
Loans receivable, excluding loans held for sale, consisted of the following at the dates indicated:
| Increase (Decrease) |
||||||||||||||||
| September 30, 2025 |
December 31, 2024 |
Amount |
Percent |
|||||||||||||
| (In thousands) |
||||||||||||||||
| Real Estate: |
||||||||||||||||
| One-to-four family |
$ | 382,486 | $ | 395,315 | $ | (12,829 | ) | (3.2 | )% | |||||||
| Multi-family |
296,321 | 332,596 | (36,275 | ) | (10.9 | ) | ||||||||||
| Commercial real estate |
396,519 | 390,379 | 6,140 | 1.6 | ||||||||||||
| Construction and land |
67,793 | 78,110 | (10,317 | ) | (13.2 | ) | ||||||||||
| Total real estate loans |
1,143,119 | 1,196,400 | (53,281 | ) | (4.5 | ) | ||||||||||
| Consumer: |
||||||||||||||||
| Home equity |
86,629 | 79,054 | 7,575 | 9.6 | ||||||||||||
| Auto and other consumer |
280,224 | 268,876 | 11,348 | 4.2 | ||||||||||||
| Total consumer loans |
366,853 | 347,930 | 18,923 | 5.4 | ||||||||||||
| Commercial business loans |
113,160 | 151,493 | (38,333 | ) | (25.3 | ) | ||||||||||
| Total loans receivable |
1,623,132 | 1,695,823 | (72,691 | ) | (4.3 | ) | ||||||||||
| Less: |
||||||||||||||||
| Derivative basis adjustment |
(896 | ) | 188 | (1,084 | ) | (576.6 | ) | |||||||||
| Allowance for credit losses on loans |
16,203 | 20,449 | (4,246 | ) | (20.8 | ) | ||||||||||
| Loans receivable, net |
$ | 1,607,825 | $ | 1,675,186 | $ | (67,361 | ) | (4.0 | ) | |||||||
The following table summarizes nonperforming assets at the dates indicated:
| Increase (Decrease) |
||||||||||||||||
| September 30, 2025 |
December 31, 2024 |
Amount |
Percent |
|||||||||||||
| (In thousands) |
||||||||||||||||
| Nonaccrual loans: |
||||||||||||||||
| Real estate loans: |
||||||||||||||||
| One-to-four family |
$ | 2,345 | $ | 1,477 | $ | 868 | 58.8 | % | ||||||||
| Commercial real estate |
3,439 | 5,598 | (2,159 | ) | (38.6 | ) | ||||||||||
| Construction and land |
6,037 | 19,544 | (13,507 | ) | (69.1 | ) | ||||||||||
| Total real estate loans |
11,821 | 26,619 | (14,798 | ) | (55.6 | ) | ||||||||||
| Consumer loans: |
||||||||||||||||
| Home equity |
9 | 55 | (46 | ) | (83.6 | ) | ||||||||||
| Auto and other consumer |
1,072 | 700 | 372 | 53.1 | ||||||||||||
| Total consumer loans |
1,081 | 755 | 326 | 43.2 | ||||||||||||
| Commercial business |
470 | 3,141 | (2,671 | ) | (85.0 | ) | ||||||||||
| Total nonaccrual loans |
13,372 | 30,515 | (17,143 | ) | (56.2 | ) | ||||||||||
| Real estate owned: |
||||||||||||||||
| One-to-four family |
1,377 | — | 1,377 | 100.0 | ||||||||||||
| Total nonperforming assets |
$ | 14,749 | $ | 30,515 | $ | (15,766 | ) | (51.7 | ) | |||||||
| MLTB loans: |
||||||||||||||||
| Commercial real estate |
$ | 10,091 | $ | 6,402 | $ | 3,689 | 57.6 | |||||||||
| Construction and land |
4,530 | — | 4,530 | 100.0 | ||||||||||||
| Commercial business |
8 | 111 | (103 | ) | (92.8 | ) | ||||||||||
| Total restructured loans |
$ | 14,629 | $ | 6,513 | $ | 8,116 | 124.6 | |||||||||
| Nonaccrual loans as a percentage of total loans |
0.82 | % | 1.80 | % | (0.98 | )% | (54.4 | ) | ||||||||
| Nonperforming MLTB loans included in total nonaccrual loans and total restructured loans above |
$ | 3,443 | $ | 111 | $ | 3,332 | 3001.8 | % | ||||||||
In the first quarter of 2025, a convertible promissory note held by First Northwest, recorded as a commercial business loan, converted into a Series A security valued at $1.3 million. The transaction resulted in a $1.0 million reduction to loans receivable, a $260,000 reduction to interest receivable and a $1.3 million increase to equity investments.
Also in the first quarter of 2025, a BOLI group life policy with a $9.4 million carrying value was terminated. In the second quarter of 2025, the Bank invested $9.1 million into a new higher-yielding BOLI separate life policy.
In the second quarter of 2025, the Bank consolidated its Bellevue and Fremont business centers into a new location. As a result, the ROU asset and lease liability balances decreased $2.0 million for the terminated leases and increased $1.3 million related to the lease for the new Seattle business center.
Liabilities. Total liabilities decreased to $1.96 billion at September 30, 2025, from $2.08 billion at December 31, 2024, due to decreases in borrowings of $76.4 million and deposits of $34.7 million.
Deposit account balances decreased $34.7 million, or 2.1%, to $1.65 billion at September 30, 2025 from $1.69 billion at December 31, 2024. During the first nine months of 2025, total customer deposit balances increased $43.9 million and brokered deposit balances decreased $78.6 million. Within customer deposit balances, increases in money market accounts of $61.8 million and savings accounts of $27.8 million were partially offset by decreases in demand deposit accounts of $19.6 million and customer CDs of $26.2 million. Increases in money market and savings accounts were driven by customers seeking higher rates. Brokered CDs are utilized as an additional funding source when it proves beneficial to provide liquidity, manage cost of funds, reduce reliance on FHLB advances, and manage interest rate risk. Overall, the current rate environment contributed to continued competition for deposits during the first nine months of 2025. As a result, the Bank continued offering deposit rate specials to retain existing balances and attract new funds.
FHLB advances decreased $80.0 million, or 27.6% to $210.0 million at September 30, 2025, from $290.0 million at December 31, 2024. The Bank utilized cash received from matured securities and loan payments to pay down short-term advances in order to reduce interest expense. Short-term borrowing fluctuates based on liquidity needs. The Company also redeemed $5.0 million of subordinated debt during the first quarter of 2025 at a discount, resulting in a one-time gain on extinguishment of debt recorded in other noninterest income.
Equity. Total shareholders' equity increased $646,000 to $154.5 million for the nine months ended September 30, 2025, due to an increase in the after-tax fair market values of the available-for-sale investment securities portfolio of $6.3 million and a $783,000 increase related to share-based compensation plans. These increases were partially offset by a $4.6 million net loss recorded during that period, $1.3 million of dividends declared and a $615,000 decrease in the post-tax fair market value of derivatives. During the first nine months of 2025, the Company did not repurchase any common stock under the Company's April 2024 stock repurchase plan, leaving 846,123 shares remaining in the current share repurchase program.
Comparison of Results of Operations for the Three Months Ended September 30, 2025 and 2024
General. The Company recorded net income of $802,000 for the three months ended September 30, 2025, compared to a net loss of $2.0 million for the three months ended September 30, 2024. A $3.8 million decrease in provision for credit losses, a $549,000 increase in net interest income and a $223,000 increase in noninterest income were partially offset by a $1.5 million increase in noninterest expense and an increase in provision for income taxes of $255,000.
Net Interest Income. Net interest income increased $549,000 to $14.57 million for the three months ended September 30, 2025, from $14.02 million for the three months ended September 30, 2024. This increase was mainly the result of decreased rates paid on interest-bearing liabilities, which decreased 32 basis points to 2.91% for the three months ended September 30, 2025, compared to 3.23% for the same period in the prior year as a result of lower rates paid on all deposit account types and borrowings and a decrease in the average balances of brokered CDs. The cost of total deposits decreased 36 basis points to 2.20% for the three months ended September 30, 2025, compared to 2.56% for the same period in 2024.The decrease in expense was partially offset by a decrease lower average yield on interest-earning assets, which decreased 7 basis points to 5.37% for the three months ended September 30, 2025, compared to 5.44% for the same period last year, due primarily to a decrease in average loan balances and lower yields on investments other interest-earning assets. It is important to note that while yields dropped period-over-period, the Company's decrease was significantly lower than the 75 basis point Fed Funds decrease over the same period.
The net interest margin increased 21 basis points to 2.91% for the three months ended September 30, 2025, from 2.70% for the same period in 2024. Total cost of funds decreased 29 basis points to 2.53% for the three months ended September 30, 2025, from 2.82% for the same period in 2024. The Company has taken measures to expand our net interest margin. Organic loan production was augmented with higher-yielding purchased loans through established third-party relationships. While the effectiveness of Bank's fair value hedging agreements on securities and loans has diminished with the Federal Reserve rate cuts, they continue to provide additional interest income.
Interest Income. Total interest income decreased $1.3 million, or 4.6%, to $26.9 million for the three months ended September 30, 2025, from $28.2 million for the comparable period in 2024, due to both lower average balances and yields on interest-earning assets. Interest and fees on loans receivable decreased $722,000, to $22.8 million for the three months ended September 30, 2025, from $23.5 million for the three months ended September 30, 2024, primarily due to a decrease in the average balance of net loans receivable of $66.6 million partially offset by an increase in average loan yields to 5.54% for the three months ended September 30, 2025, from 5.51% for the same period in 2024. The average balances of multi-family, construction, commercial business and auto loans decreased compared to the same quarter in 2024, categories that generally earn higher yields. The yield earned on investment securities decreased 52 basis points to 4.38% compared to the same period in 2024, as variable-rate investments repriced and higher-yielding securities matured in 2025.
The following table compares average earning asset balances, associated yields, and resulting changes in interest income for the periods shown:
| Three Months Ended September 30, |
||||||||||||||||||||
| 2025 |
2024 |
|||||||||||||||||||
| Average Balance Outstanding |
Yield |
Average Balance Outstanding |
Yield |
(Decrease) Increase in Interest Income |
||||||||||||||||
| (Dollars in thousands) |
||||||||||||||||||||
| Loans receivable, net |
$ | 1,632,684 | 5.54 | % | $ | 1,699,302 | 5.51 | % | $ | (722 | ) | |||||||||
| Investment securities |
293,723 | 4.38 | 307,623 | 4.90 | (542 | ) | ||||||||||||||
| FHLB stock |
12,810 | 8.73 | 12,697 | 9.46 | (20 | ) | ||||||||||||||
| Interest-earning deposits in banks |
50,150 | 4.51 | 42,348 | 5.47 | (12 | ) | ||||||||||||||
| Total interest-earning assets |
$ | 1,989,367 | 5.37 | $ | 2,061,970 | 5.44 | $ | (1,296 | ) | |||||||||||
Interest Expense. Total interest expense decreased $1.9 million, or 13.0%, to $12.3 million for the three months ended September 30, 2025, compared to $14.2 million for the three months ended September 30, 2024. The decrease from the third quarter of 2024 was the result of lower average brokered CDs balances along with a decrease in the total cost of deposits to 2.20% from 2.56% in same period one year ago. The lower rates on customer deposit accounts further contributed to the period-over-period savings. Interest expense on borrowings increased marginally due to an average balance increase in advances, primarily FHLB advances, of $10.2 million offset by a decrease in the cost of advances to 4.35% from 4.41% compared to the same period in 2024.
Average deposit account balances were composed of 85% in interest-bearing deposits and 15% in noninterest-bearing deposits at both September 30, 2025 and September 30, 2024. During the three months ended September 30, 2025, interest expense decreased for CDs due to a decrease in the average rates paid of 57 basis points, compared to the three months ended September 30, 2024, partially offset by a decrease in the average balances of $83.2 million. Interest-bearing demand accounts further contributed the decreased expense with a 30 basis point reduction in the rate paid and a $25.4 million decline in average balances. During the same period, the average balances of money market accounts increased $32.9 million offset by a 23 basis point average rate decrease, resulting in a decrease to interest expense. The average cost of all interest-bearing deposit accounts decreased to 2.60% for the three months ended September 30, 2025, from 3.00% for the three months ended September 30, 2024, primarily due to the reduction in brokered CDs. The mix of customer deposit balances shifted from demand accounts towards higher cost CD and money market products. Customer CDs represented 28.3% and 29.3% of customer deposits at September 30, 2025 and 2024, respectively.
The following table details average balances, cost of funds and the change in interest expense for the periods shown:
| Three Months Ended September 30, |
||||||||||||||||||||
| 2025 |
2024 |
|||||||||||||||||||
| Average Balance Outstanding |
Rate |
Average Balance Outstanding |
Rate |
(Decrease) Increase in Interest Expense |
||||||||||||||||
| (Dollars in thousands) |
||||||||||||||||||||
| Interest-bearing demand deposits |
$ | 141,469 | 0.15 | % | $ | 166,846 | 0.45 | % | $ | (135 | ) | |||||||||
| Money market accounts |
464,265 | 2.42 | 431,346 | 2.65 | (43 | ) | ||||||||||||||
| Savings accounts |
231,431 | 1.57 | 224,159 | 1.64 | (9 | ) | ||||||||||||||
| Certificates of deposit, customer |
443,312 | 3.74 | 415,450 | 4.16 | (165 | ) | ||||||||||||||
| Certificates of deposit, brokered |
103,959 | 4.24 | 215,016 | 4.88 | (1,525 | ) | ||||||||||||||
| Advances |
265,554 | 4.35 | 255,348 | 4.41 | 81 | |||||||||||||||
| Subordinated debt |
34,617 | 3.95 | 39,484 | 3.97 | (49 | ) | ||||||||||||||
| Total interest-bearing liabilities |
$ | 1,684,607 | 2.91 | $ | 1,747,649 | 3.23 | $ | (1,845 | ) | |||||||||||
Provision for Credit Losses. The Company recorded a $673,000 recapture of provision for credit losses in the three months ended September 30, 2025. A recapture of provision for credit losses on loans of $620,000 was the result of a reduction in the pooled loan reserve and a small decrease in the reserve on individually evaluated loans, partially offset by net loan charge-offs for the quarter. Decreases in commercial business and multi-family loan balances were the primary contributors to the reduction in the pooled loan reserve. The pooled loan reserve was further reduced by decreased estimated CECL loss factors applied at quarter end to one-to-four family, commercial business, consumer and home equity loan balances while loss factors applied to pooled multi-family, commercial real estate and construction loans increased. A recapture of provision for credit losses on unfunded commitments of $53,000 was also recorded during the quarter ended September 30, 2025, due to reduced loss factors and commitment balances at quarter end. The total provision for credit losses on loans was $3.1 million for the quarter ended September 30, 2024, and the provision on unfunded commitments was $57,000. The ACLL as a percentage of nonaccrual loans at period end increased to 121% compared to 72% for the same period in 2024.
The following table details activity and information related to the allowance for credit losses on loans and reserve for unfunded commitments for the periods shown:
| Three Months Ended September 30, |
||||||||
| 2025 |
2024 |
|||||||
| (Dollars in thousands) |
||||||||
| Total loans receivable |
$ | 1,623,132 | $ | 1,734,807 | ||||
| Net charge-offs |
(1,522 | ) | (450 | ) | ||||
| (Recapture of) provision for credit losses on loans |
(620 | ) | 3,077 | |||||
| Allowance for credit losses on loans |
16,203 | 21,970 | ||||||
| Allowance for credit losses on loans as a percentage of total loans receivable at period end |
1.00 | % | 1.27 | % | ||||
| Total nonaccrual loans |
13,372 | 30,376 | ||||||
| Allowance for credit losses on loans as a percentage of nonaccrual loans at period end |
121 | % | 72 | % | ||||
| Nonaccrual loans as a percentage of total loans receivable |
0.82 | % | 1.75 | % | ||||
| Unfunded loan commitments |
$ | 158,118 | $ | 166,446 | ||||
| (Recapture of) provision for credit losses on unfunded commitments |
(53 | ) | 57 | |||||
| Reserve for unfunded commitments |
497 | 704 | ||||||
Noninterest Income. Noninterest income increased $223,000, or 12.5%, to $2.0 million for the three months ended September 30, 2025, from $1.8 million for the three months ended September 30, 2024. The increase is primarily due to the BOLI cash surrender value increase as a result of the conversion into higher-yielding BOLI policies during 2024 and 2025. Loan and deposit service fees also received a small boost from higher interchange and ATM network fee income. Other income for the current quarter included swap fee income of $113,000 and period-over-period decrease in the recorded value of equity and fintech partnership investments of $140,000.
The following table provides a detailed analysis of the changes in the components of noninterest income for the periods shown:
| Three Months Ended September 30, |
Increase (Decrease) |
|||||||||||||||
| 2025 |
2024 |
Amount |
Percent |
|||||||||||||
| (Dollars in thousands) |
||||||||||||||||
| Loan and deposit service fees |
$ | 1,114 | $ | 1,059 | $ | 55 | 5.2 | % | ||||||||
| Sold loan servicing fees and servicing rights mark-to-market |
85 | 10 | 75 | 750.0 | ||||||||||||
| Net (loss) gain on sale of loans |
(39 | ) | 58 | (97 | ) | (167.2 | ) | |||||||||
| Increase in BOLI cash surrender value |
539 | 315 | 224 | 71.1 | ||||||||||||
| Other income |
303 | 337 | (34 | ) | (10.1 | ) | ||||||||||
| Total noninterest income |
$ | 2,002 | $ | 1,779 | $ | 223 | 12.5 | |||||||||
Noninterest Expense. Noninterest expense increased $1.5 million, or 9.7%, to $17.4 million for the three months ended September 30, 2025, compared to $15.9 million for the three months ended September 30, 2024. The increase in expenses compared to the third quarter of 2024 is mainly due to a period-over-period increase of $1.8 million in legal services as the Company continues to defend against the claims detailed in Note 15 contained in Item 1 of this Form 10-Q. Compensation and benefits, while lower than the same period one year ago, included nonrecurring expenses totaling $1.2 million for executive transition costs. Other expense includes commercial credit related costs totaling $516,000. The Company continues to focus on controlling expenses to improve earnings.
The following table provides an analysis of the changes in the components of noninterest expense for the periods shown:
| Three Months Ended September 30, |
Increase (Decrease) |
|||||||||||||||
| 2025 |
2024 |
Amount |
Percent |
|||||||||||||
| (Dollars in thousands) |
||||||||||||||||
| Compensation and benefits |
$ | 8,353 | $ | 8,582 | $ | (229 | ) | (2.7 | )% | |||||||
| Data processing |
1,941 | 2,085 | (144 | ) | (6.9 | ) | ||||||||||
| Occupancy and equipment |
1,505 | 1,553 | (48 | ) | (3.1 | ) | ||||||||||
| Supplies, postage, and telephone |
344 | 360 | (16 | ) | (4.4 | ) | ||||||||||
| Regulatory assessments and state taxes |
558 | 548 | 10 | 1.8 | ||||||||||||
| Advertising |
282 | 409 | (127 | ) | (31.1 | ) | ||||||||||
| Professional fees |
2,668 | 698 | 1,970 | 282.2 | ||||||||||||
| FDIC insurance premium |
411 | 533 | (122 | ) | (22.9 | ) | ||||||||||
| Other expense |
1,328 | 1,080 | 248 | 23.0 | ||||||||||||
| Total noninterest expense |
$ | 17,390 | $ | 15,848 | $ | 1,542 | 9.7 | |||||||||
Provision for Income Tax. An income tax benefit of $948,000 was recorded for the three months ended September 30, 2025, compared to a benefit of $1.2 million for the three months ended September 30, 2024. The lower benefit is due to a period-over-period increase in income before taxes of $3.0 million. The provision includes accruals for both federal and state income taxes. For additional information, see Note 7 of the Notes to Consolidated Financial Statements contained in Item 1 of this Form 10-Q.
Comparison of Results of Operations for the Nine Months Ended September 30, 2025 and 2024
General. The Company recorded a net loss of $4.6 million for the nine months ended September 30, 2025, compared to a net loss of $3.8 million for the nine months ended September 30, 2024. A $4.4 million increase in noninterest expense and a $3.4 million decrease in noninterest income were partially offset by a $6.1 million decrease in provision for credit losses, a $426,000 increase in net interest income and a $473,000 increase in income tax benefit.
Net Interest Income. Net interest income increased $426,000 to $42.6 million for the nine months ended September 30, 2025, from $42.2 million for the nine months ended September 30, 2024, as reduced deposit and borrowing costs outpaced declines in loan, investment and interest-earning deposit income.
Average earning assets decreased $43.7 million year-over-year. The yield on average interest-earning assets decreased 9 basis points to 5.38% for the nine months ended September 30, 2025, compared to 5.47% for the same period in the prior year, due to decreases in average net loans receivable and FHLB stock balances, along with decreased yields on all interest-earning assets.
The average cost of interest-bearing liabilities decreased to 2.99% for the nine months ended September 30, 2025, compared to 3.22% for the same period last year, due primarily to decreases in the average balances of brokered CDs and advances along with lower rates paid on advances, CDs, and savings accounts. Total cost of funds decreased 20 basis points to 2.61% for the nine months ended September 30, 2025, from 2.81% for the same period in 2024.
The net interest margin increased 9 basis points to 2.83% for the nine months ended September 30, 2025, compared to 2.74% for the same period in 2024.
Interest Income. Total interest income decreased $3.3 million, or 3.9%, to $80.9 million for the nine months ended September 30, 2025, from $84.1 million for the comparable period in 2024, primarily due to a decrease in yields on all interest-earning assets and a decrease in average net loans receivable and FHLB stock balances. Interest and fees on loans receivable decreased $2.2 million, to $67.9 million for the nine months ended September 30, 2025, from $70.0 million for the nine months ended September 30, 2024, primarily due to a decrease in the average balance of net loans receivable of $48.6 million compared to the prior year, coupled with a slight decrease in average loan yields to 5.54% for the nine months ended September 30, 2025, from 5.55% for the same period in 2024. As a market comparison, the Fed Funds rate decreased 75 basis points over the same period. Average balances in the loan portfolio decreased primarily due to lower average balances of construction and multi-family loans partially offset by higher average purchased manufactured home loan balances, commercial real estate, one-to-four family and purchased auto loans. Loan yields decreased over the prior year due to the repricing of variable- and adjustable-rate loans tied to the Prime Rate or other variable-rate indices. The yield earned on investment securities also decreased 39 basis points to 4.50% compared to the same period in 2024, due to variable-rate bond yields and maturities of higher yielding investments.
The following table compares average earning asset balances, associated yields, and resulting changes in interest income for the periods shown:
| Nine Months Ended September 30, |
||||||||||||||||||||
| 2025 |
2024 |
|||||||||||||||||||
| Average Balance Outstanding |
Yield |
Average Balance Outstanding |
Yield |
(Decrease) Increase in Interest Income |
||||||||||||||||
| (Dollars in thousands) |
||||||||||||||||||||
| Loans receivable, net |
$ | 1,637,919 | 5.54 | % | $ | 1,686,546 | 5.55 | % | $ | (2,177 | ) | |||||||||
| Investment securities |
312,525 | 4.50 | 310,653 | 4.89 | (854 | ) | ||||||||||||||
| FHLB stock |
13,241 | 9.29 | 13,397 | 9.39 | (22 | ) | ||||||||||||||
| Interest-earning deposits in banks |
46,651 | 4.51 | 43,456 | 5.53 | (226 | ) | ||||||||||||||
| Total interest-earning assets |
$ | 2,010,336 | 5.38 | $ | 2,054,052 | 5.47 | $ | (3,279 | ) | |||||||||||
Interest Expense. Total interest expense decreased $3.7 million, or 8.8%, to $38.3 million for the nine months ended September 30, 2025, compared to $42.0 million for the nine months ended September 30, 2024. Interest expense on deposits decreased $2.9 million due to a $25.3 million decrease in the in the average balance and a 22 basis point decrease in the cost of interest-bearing deposits. A shift in the deposit mix from brokered CDs and savings accounts to higher average balances of customer CDs and money market accounts resulted in a lower cost of deposits. Interest expense on borrowings decreased $825,000 due to a $4.7 million decrease in the average balance and a 29 basis point decrease in the cost of borrowings, primarily FHLB advances, compared to the same period in 2024.
During the nine months ended September 30, 2025, interest expense on brokered CDs decreased due to lower average balances of $81.5 million along with a 44 basis point decrease in the average rate paid, compared to the nine months ended September 30, 2024. During the same period, the average balances of money market accounts increased $36.3 million, resulting in an increase which partially offset the reduced brokered CDs expense. The average cost of all interest-bearing deposit accounts decreased to 2.70% for the nine months ended September 30, 2025, from 2.92% for the nine months ended September 30, 2024. The mix of customer deposit balances shifted from demand and savings accounts towards money market accounts and CDs. The Bank uses promotional products designed to retain existing deposits and generate new deposits. Promotional rates are regularly reviewed and adjusted. Customer CDs represented 26.5% and 25.8% of total deposits at September 30, 2025 and 2024, respectively. Brokered CDs represented 6.3% and 11.9% of total deposits at September 30, 2025 and 2024, respectively.
The following table details average balances, cost of funds and the change in interest expense for the periods shown:
| Nine Months Ended September 30, |
||||||||||||||||||||
| 2025 |
2024 |
|||||||||||||||||||
| Average Balance Outstanding |
Rate |
Average Balance Outstanding |
Rate |
(Decrease) Increase in Interest Expense |
||||||||||||||||
| (Dollars in thousands) |
||||||||||||||||||||
| Interest-bearing demand deposits |
$ | 158,020 | 0.47 | % | $ | 165,816 | 0.46 | % | $ | (15 | ) | |||||||||
| Money market accounts |
441,125 | 2.38 | 404,845 | 2.39 | 593 | |||||||||||||||
| Savings accounts |
225,665 | 1.53 | 229,180 | 1.63 | (210 | ) | ||||||||||||||
| Certificates of deposit, customer |
448,955 | 3.90 | 417,716 | 4.13 | 180 | |||||||||||||||
| Certificates of deposit, brokered |
128,672 | 4.48 | 210,186 | 4.92 | (3,428 | ) | ||||||||||||||
| Advances |
273,359 | 4.31 | 274,475 | 4.64 | (716 | ) | ||||||||||||||
| Subordinated debt |
35,849 | 4.01 | 39,465 | 4.00 | (109 | ) | ||||||||||||||
| Total interest-bearing liabilities |
$ | 1,711,645 | 2.99 | $ | 1,741,683 | 3.22 | $ | (3,705 | ) | |||||||||||
Provision for Credit Losses. The Company recorded a $6.9 million loan loss provision offset by a $102,000 unfunded commitment provision recapture for the nine months ended September 30, 2025. This compares to a $13.0 million loan loss provision offset by a $113,000 unfunded commitment provision recapture for the nine months ended September 30, 2024. The current period provision for credit losses on loans reflects changes due to underlying collateral deficiencies or uncertain collectability of three commercial real estate loans, six commercial business loans, a commercial construction loan, a group of commercial equipment loans and consumer unsecured loans resulting in net charge-offs totaling $11.1 million for the nine-month period. Net charge-offs were partially offset by a decrease in the reserve on individually evaluated loans, as the loans with reserves were sold or paid off, and lower pooled reserve loan balances at September 30, 2025. The lower unfunded commitment provision recapture compared to the same period in 2024 was due to lower qualitative loss factors.
The following table details activity and information related to the allowance for credit losses on loans and reserve for unfunded commitments for the periods shown:
| Nine Months Ended September 30, |
||||||||
| 2025 |
2024 |
|||||||
| (Dollars in thousands) |
||||||||
| Total loans receivable |
$ | 1,623,132 | $ | 1,734,807 | ||||
| Net charge-offs |
(11,100 | ) | (8,496 | ) | ||||
| Provision for credit losses on loans |
6,854 | 12,956 | ||||||
| Allowance for credit losses on loans |
16,203 | 21,970 | ||||||
| Allowance for credit losses on loans as a percentage of total loans receivable at period end |
1.00 | % | 1.27 | % | ||||
| Total nonaccrual loans |
13,372 | 30,376 | ||||||
| Allowance for credit losses on loans as a percentage of nonaccrual loans at period end |
121 | % | 72 | % | ||||
| Nonaccrual loans as a percentage of total loans receivable |
0.82 | % | 1.75 | % | ||||
| Unfunded loan commitments |
$ | 158,118 | $ | 166,446 | ||||
| Recapture of provision for credit losses on unfunded commitments |
(102 | ) | (113 | ) | ||||
| Reserve for unfunded commitments |
497 | 704 | ||||||
Noninterest Income. Noninterest income decreased $3.4 million, or 29.7%, to $8.0 million for the nine months ended September 30, 2025, from $11.3 million for the nine months ended September 30, 2024. The prior year included a $7.9 million gain recorded for the sale-leaseback transaction partially offset by a $2.1 million loss on the sale of investment securities. Additional income recorded in the current year includes a $1.1 million BOLI death benefit and a $846,000 gain on the extinguishment of debt related to repurchasing $5.0 million of subordinated debt at a discount recorded in other income. The BOLI cash surrender value increased as a result of the conversion into higher-yielding BOLI policies in 2024 and 2025.
The following table provides a detailed analysis of the changes in the components of noninterest income for the periods shown:
| Nine Months Ended September 30, |
Increase (Decrease) |
|||||||||||||||
| 2025 |
2024 |
Amount |
Percent |
|||||||||||||
| (Dollars in thousands) |
||||||||||||||||
| Loan and deposit service fees |
$ | 3,315 | $ | 3,237 | $ | 78 | 2.4 | % | ||||||||
| Sold loan servicing fees and servicing rights mark-to-market |
372 | 303 | 69 | 22.8 | ||||||||||||
| Net (loss) gain on sale of loans |
16 | 260 | (244 | ) | (93.8 | ) | ||||||||||
| Net loss on sale of investment securities |
— | (2,117 | ) | 2,117 | (100.0 | ) | ||||||||||
| Net gain on sale of premises and equipment |
— | 7,919 | (7,919 | ) | (100.0 | ) | ||||||||||
| Increase in BOLI cash surrender value |
1,396 | 851 | 545 | 64.0 | ||||||||||||
| Income from BOLI death benefit, net |
1,059 | — | 1,059 | 100.0 | ||||||||||||
| Other income |
1,791 | 861 | 930 | 108.0 | ||||||||||||
| Total noninterest income |
$ | 7,949 | $ | 11,314 | $ | (3,365 | ) | (29.7 | ) | |||||||
Noninterest Expense. Noninterest expense increased $4.4 million, or 9.6%, to $50.2 million for the nine months ended September 30, 2025, compared to $45.8 million for the nine months ended September 30, 2024. Expenses increased compared to the same period in 2024 due to a $5.8 million legal settlement and a $599,000 loss on disposal of leasehold improvements, both included in other expense, and a $528,000 employee retention credit ("ERC") consulting cost included in professional fees recorded in the second quarter of 2025. Other increases include $1.2 million of nonrecurring executive transition costs recorded during the third quarter of 2025. Legal expense included in professional fees increased $1.8 million period-over-period as the Company continues to defend against the claims detailed in Note 15 contained in Item 1 of this Form 10-Q. These increases were partially offset by a $2.6 million ERC recorded in compensation during the second quarter of 2025 along with lower compensation and benefit costs due to a smaller workforce. The Company continues to focus on controlling expenses to improve earnings.
The following table provides an analysis of the changes in the components of noninterest expense for the periods shown:
| Nine Months Ended September 30, |
Increase (Decrease) |
|||||||||||||||
| 2025 |
2024 |
Amount |
Percent |
|||||||||||||
| (Dollars in thousands) |
||||||||||||||||
| Compensation and benefits |
$ | 20,766 | $ | 25,298 | $ | (4,532 | ) | (17.9 | )% | |||||||
| Data processing |
5,878 | 6,037 | (159 | ) | (2.6 | ) | ||||||||||
| Occupancy and equipment |
4,604 | 4,592 | 12 | 0.3 | ||||||||||||
| Supplies, postage, and telephone |
988 | 970 | 18 | 1.9 | ||||||||||||
| Regulatory assessments and state taxes |
1,538 | 1,518 | 20 | 1.3 | ||||||||||||
| Advertising |
846 | 1,095 | (249 | ) | (22.7 | ) | ||||||||||
| Professional fees |
4,894 | 2,292 | 2,602 | 113.5 | ||||||||||||
| FDIC insurance premium |
1,308 | 1,392 | (84 | ) | (6.0 | ) | ||||||||||
| Other expense |
9,333 | 2,566 | 6,767 | 263.7 | ||||||||||||
| Total noninterest expense |
$ | 50,155 | $ | 45,760 | $ | 4,395 | 9.6 | |||||||||
Provision for Income Tax. An income tax benefit of $1.8 million was recorded for the nine months ended September 30, 2025, compared to a benefit of $1.3 million for the nine months ended September 30, 2024, due to a period-over-period increase in net loss before taxes of $1.2 million. Both periods include a tax penalty estimate for the early surrender of BOLI contracts. The provision also includes accruals for both federal and state income taxes. For additional information, see Note 7 of the Notes to Consolidated Financial Statements contained in Item 1 of this Form 10-Q.
Average Balances, Interest and Average Yields/Cost
The following tables set forth, for the periods indicated, information regarding average balances of assets and liabilities as well as the total dollar amounts of interest income from average interest-earning assets and interest expense on average interest-bearing liabilities, resultant yields, interest rate spread, net interest margin (otherwise known as net yield on interest-earning assets), and the ratio of average interest-earning assets to average interest-bearing liabilities. Also presented is the weighted average yield on interest-earning assets, rates paid on interest-bearing liabilities and the net spread as of September 30, 2025 and 2024. Income and all average balances are monthly average balances, which management deems to be not materially different than daily averages. Nonaccrual loans have been included within loans receivable in the table as loans carrying a zero yield.
| Three Months Ended September 30, |
||||||||||||||||||||||||
| 2025 |
2024 |
|||||||||||||||||||||||
| Average |
Interest |
Average |
Interest |
|||||||||||||||||||||
| Balance |
Earned/ |
Yield/ |
Balance |
Earned/ |
Yield/ |
|||||||||||||||||||
| Outstanding |
Paid |
Rate |
Outstanding |
Paid |
Rate |
|||||||||||||||||||
| (Dollars in thousands) |
||||||||||||||||||||||||
| Interest-earning assets: |
||||||||||||||||||||||||
| Loans receivable, net (1) (2) |
$ | 1,632,684 | $ | 22,814 | 5.54 | % | $ | 1,699,302 | $ | 23,536 | 5.51 | % | ||||||||||||
| Total investment securities |
293,723 | 3,244 | 4.38 | 307,623 | 3,786 | 4.90 | ||||||||||||||||||
| FHLB dividends |
12,810 | 282 | 8.73 | 12,697 | 302 | 9.46 | ||||||||||||||||||
| Interest-earning deposits in banks |
50,150 | 570 | 4.51 | 42,348 | 582 | 5.47 | ||||||||||||||||||
| Total interest-earning assets (3) |
1,989,367 | 26,910 | 5.37 | 2,061,970 | 28,206 | 5.44 | ||||||||||||||||||
| Noninterest-earning assets |
146,042 | 147,363 | ||||||||||||||||||||||
| Total average assets |
$ | 2,135,409 | $ | 2,209,333 | ||||||||||||||||||||
| Interest-bearing liabilities: |
||||||||||||||||||||||||
| Interest-bearing demand deposits |
$ | 141,469 | $ | 52 | 0.15 | $ | 166,846 | $ | 187 | 0.45 | ||||||||||||||
| Money market accounts |
464,265 | 2,832 | 2.42 | 431,346 | 2,875 | 2.65 | ||||||||||||||||||
| Savings accounts |
231,431 | 914 | 1.57 | 224,159 | 923 | 1.64 | ||||||||||||||||||
| Certificates of deposit, customer |
443,312 | 4,175 | 3.74 | 415,450 | 4,340 | 4.16 | ||||||||||||||||||
| Certificates of deposit, brokered |
103,959 | 1,110 | 4.24 | 215,016 | 2,635 | 4.88 | ||||||||||||||||||
| Total interest-bearing deposits (4) |
1,384,436 | 9,083 | 2.60 | 1,452,817 | 10,960 | 3.00 | ||||||||||||||||||
| Advances |
265,554 | 2,913 | 4.35 | 255,348 | 2,832 | 4.41 | ||||||||||||||||||
| Subordinated debt |
34,617 | 345 | 3.95 | 39,484 | 394 | 3.97 | ||||||||||||||||||
| Total interest-bearing liabilities |
1,684,607 | 12,341 | 2.91 | 1,747,649 | 14,186 | 3.23 | ||||||||||||||||||
| Noninterest-bearing deposits (4) |
251,448 | 252,911 | ||||||||||||||||||||||
| Other noninterest-bearing liabilities |
47,978 | 48,294 | ||||||||||||||||||||||
| Total average liabilities |
1,984,033 | 2,048,854 | ||||||||||||||||||||||
| Average equity |
151,376 | 160,479 | ||||||||||||||||||||||
| Total average liabilities and equity |
$ | 2,135,409 | $ | 2,209,333 | ||||||||||||||||||||
| Net interest income |
$ | 14,569 | $ | 14,020 | ||||||||||||||||||||
| Net interest rate spread |
2.46 | 2.21 | ||||||||||||||||||||||
| Net earning assets |
$ | 304,760 | $ | 314,321 | ||||||||||||||||||||
| Net interest margin (5) |
2.91 | 2.70 | ||||||||||||||||||||||
| Average interest-earning assets to average interest-bearing liabilities |
118.1 | % | 118.0 | % | ||||||||||||||||||||
(1) The average loans receivable, net balances include nonaccrual loans.
(2) Interest earned on loans receivable includes net deferred (costs) fees of ($410,000) and $22,000 for the three months ended September 30, 2025 and 2024, respectively.
(3) Includes interest-earning deposits (cash) at other financial institutions.
(4) Cost of all deposits, including noninterest-bearing demand deposits, was 2.20% and 2.56% for the three months ended September 30, 2025 and 2024, respectively.
(5) Net interest income divided by average interest-earning assets.
| Nine Months Ended September 30, |
||||||||||||||||||||||||
| 2025 |
2024 |
|||||||||||||||||||||||
| Average |
Interest |
Average |
Interest |
|||||||||||||||||||||
| Balance |
Earned/ |
Yield/ |
Balance |
Earned/ |
Yield/ |
|||||||||||||||||||
| Outstanding |
Paid |
Rate |
Outstanding |
Paid |
Rate |
|||||||||||||||||||
| (Dollars in thousands) |
||||||||||||||||||||||||
| Interest-earning assets: |
||||||||||||||||||||||||
| Loans receivable, net (1) (2) |
$ | 1,637,919 | $ | 67,859 | 5.54 | % | $ | 1,686,546 | $ | 70,036 | 5.55 | % | ||||||||||||
| Total investment securities |
312,525 | 10,513 | 4.50 | 310,653 | 11,367 | 4.89 | ||||||||||||||||||
| FHLB dividends |
13,241 | 920 | 9.29 | 13,397 | 942 | 9.39 | ||||||||||||||||||
| Interest-earning deposits in banks |
46,651 | 1,572 | 4.51 | 43,456 | 1,798 | 5.53 | ||||||||||||||||||
| Total interest-earning assets (3) |
2,010,336 | 80,864 | 5.38 | 2,054,052 | 84,143 | 5.47 | ||||||||||||||||||
| Noninterest-earning assets |
147,755 | 144,285 | ||||||||||||||||||||||
| Total average assets |
$ | 2,158,091 | $ | 2,198,337 | ||||||||||||||||||||
| Interest-bearing liabilities: |
||||||||||||||||||||||||
| Interest-bearing demand deposits |
$ | 158,020 | $ | 552 | 0.47 | $ | 165,816 | $ | 567 | 0.46 | ||||||||||||||
| Money market accounts |
441,125 | 7,837 | 2.38 | 404,845 | 7,244 | 2.39 | ||||||||||||||||||
| Savings accounts |
225,665 | 2,581 | 1.53 | 229,180 | 2,791 | 1.63 | ||||||||||||||||||
| Certificates of deposit, customer |
448,955 | 13,093 | 3.90 | 417,716 | 12,913 | 4.13 | ||||||||||||||||||
| Certificates of deposit, brokered |
128,672 | 4,309 | 4.48 | 210,186 | 7,737 | 4.92 | ||||||||||||||||||
| Total interest-bearing deposits (4) |
1,402,437 | 28,372 | 2.70 | 1,427,743 | 31,252 | 2.92 | ||||||||||||||||||
| Advances |
273,359 | 8,809 | 4.31 | 274,475 | 9,525 | 4.64 | ||||||||||||||||||
| Subordinated debt |
35,849 | 1,074 | 4.01 | 39,465 | 1,183 | 4.00 | ||||||||||||||||||
| Total interest-bearing liabilities |
1,711,645 | 38,255 | 2.99 | 1,741,683 | 41,960 | 3.22 | ||||||||||||||||||
| Noninterest-bearing deposits (4) |
246,252 | 251,218 | ||||||||||||||||||||||
| Other noninterest-bearing liabilities |
48,656 | 43,633 | ||||||||||||||||||||||
| Total average liabilities |
2,006,553 | 2,036,534 | ||||||||||||||||||||||
| Average equity |
151,538 | 161,803 | ||||||||||||||||||||||
| Total average liabilities and equity |
$ | 2,158,091 | $ | 2,198,337 | ||||||||||||||||||||
| Net interest income |
$ | 42,609 | $ | 42,183 | ||||||||||||||||||||
| Net interest rate spread |
2.39 | 2.25 | ||||||||||||||||||||||
| Net earning assets |
$ | 298,691 | $ | 312,369 | ||||||||||||||||||||
| Net interest margin (5) |
2.83 | 2.74 | ||||||||||||||||||||||
| Average interest-earning assets to average interest-bearing liabilities |
117.5 | % | 117.9 | % | ||||||||||||||||||||
| (1) The average loans receivable, net balances include nonaccrual loans. (2) Interest earned on loans receivable includes net deferred costs of ($896,000) and ($115,000) for the nine months ended September 30, 2025 and 2024, respectively. (3) Includes interest-earning deposits (cash) at other financial institutions. (4) Cost of all deposits, including noninterest-bearing demand deposits, was 2.30% and 2.49% for the nine months ended September 30, 2025 and 2024, respectively. (5) Net interest income divided by average interest-earning assets. |
|||||||||||||||||||||
Rate/Volume Analysis
The following table presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. It distinguishes between the changes related to outstanding balances and changes in interest rates. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in volume (i.e., changes in volume multiplied by old rate) and (ii) changes in rate (i.e., changes in rate multiplied by old volume). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate.
| Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||
| September 30, 2025 Compared to September 30, 2024 |
September 30, 2025 Compared to September 30, 2024 |
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| Increase (Decrease) Due to |
Increase (Decrease) Due to |
|||||||||||||||||||||||
| Volume |
Rate |
Total Increase (Decrease) |
Volume |
Rate |
Total Increase (Decrease) |
|||||||||||||||||||
| (In thousands) |
||||||||||||||||||||||||
| Interest-earning assets: |
||||||||||||||||||||||||
| Loans receivable, net |
$ | (885 | ) | $ | 163 | $ | (722 | ) | $ | (2,037 | ) | $ | (140 | ) | $ | (2,177 | ) | |||||||
| Investments |
(165 | ) | (377 | ) | (542 | ) | 63 | (917 | ) | (854 | ) | |||||||||||||
| FHLB stock |
3 | (23 | ) | (20 | ) | (12 | ) | (10 | ) | (22 | ) | |||||||||||||
| Other (1) |
108 | (120 | ) | (12 | ) | 131 | (357 | ) | (226 | ) | ||||||||||||||
| Total interest-earning assets |
$ | (939 | ) | $ | (357 | ) | $ | (1,296 | ) | $ | (1,855 | ) | $ | (1,424 | ) | $ | (3,279 | ) | ||||||
| Interest-bearing liabilities: |
||||||||||||||||||||||||
| Interest-bearing demand deposits |
$ | (29 | ) | $ | (106 | ) | $ | (135 | ) | $ | (27 | ) | $ | 12 | $ | (15 | ) | |||||||
| Money market accounts |
223 | (266 | ) | (43 | ) | 637 | (44 | ) | 593 | |||||||||||||||
| Savings accounts |
31 | (40 | ) | (9 | ) | (42 | ) | (168 | ) | (210 | ) | |||||||||||||
| Certificates of deposit, customer |
298 | (463 | ) | (165 | ) | 958 | (778 | ) | 180 | |||||||||||||||
| Certificates of deposit, brokered |
(1,361 | ) | (164 | ) | (1,525 | ) | (3,003 | ) | (425 | ) | (3,428 | ) | ||||||||||||
| Advances |
117 | (36 | ) | 81 | (40 | ) | (676 | ) | (716 | ) | ||||||||||||||
| Subordinated debt |
(48 | ) | (1 | ) | (49 | ) | (110 | ) | 1 | (109 | ) | |||||||||||||
| Total interest-bearing liabilities |
$ | (769 | ) | $ | (1,076 | ) | $ | (1,845 | ) | $ | (1,627 | ) | $ | (2,078 | ) | $ | (3,705 | ) | ||||||
| Change in net interest income |
$ | (170 | ) | $ | 719 | $ | 549 | $ | (228 | ) | $ | 654 | $ | 426 | ||||||||||
| (1) Includes interest-earning deposits (cash) at other financial institutions. |
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Off-Balance Sheet Activities
In the normal course of operations, First Fed engages in a variety of financial transactions that are not recorded in the financial statements. These transactions involve varying degrees of off-balance sheet credit, interest rate and liquidity risks. These transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments and lines of credit. For the nine months ended September 30, 2025 and the year ended December 31, 2024, we engaged in no off-balance sheet transactions likely to have a material effect on our financial condition, results of operations or cash flows.
Contractual Obligations
At September 30, 2025, our scheduled maturities of contractual obligations were as follows:
| Within |
After 1 Year Through |
After 3 Years Through |
Beyond |
Total |
||||||||||||||||
| 1 Year |
3 Years |
5 Years |
5 Years |
Balance |
||||||||||||||||
| (In thousands) |
||||||||||||||||||||
| Certificates of deposit |
$ | 448,082 | $ | 91,009 | $ | 4,052 | $ | — | $ | 543,143 | ||||||||||
| FHLB advances |
115,000 | 95,000 | — | — | 210,000 | |||||||||||||||
| Line of credit |
15,000 | — | — | — | 15,000 | |||||||||||||||
| Subordinated debt obligation |
— | — | — | 34,625 | 34,625 | |||||||||||||||
| Operating leases |
2,078 | 4,276 | 3,974 | 16,641 | 26,969 | |||||||||||||||
| Borrower taxes and insurance |
2,356 | — | — | — | 2,356 | |||||||||||||||
| Deferred compensation |
290 | 279 | 278 | 682 | 1,529 | |||||||||||||||
| Total contractual obligations |
$ | 582,806 | $ | 190,564 | $ | 8,304 | $ | 51,948 | $ | 833,622 | ||||||||||
Commitments and Off-Balance Sheet Arrangements
The following table summarizes our commitments and contingent liabilities with off-balance sheet risks as of September 30, 2025:
| Amount of Commitment by Expiration |
||||||||||||||||||||
| Within |
After 1 Year Through |
After 3 Years Through |
Beyond |
Total Amounts |
||||||||||||||||
| 1 Year |
3 Years |
5 Years |
5 Years |
Committed |
||||||||||||||||
| (In thousands) |
||||||||||||||||||||
| Commitments to originate loans: |
||||||||||||||||||||
| Variable-rate |
$ | 6,847 | $ | — | $ | — | $ | — | $ | 6,847 | ||||||||||
| Unfunded commitments under lines of credit |
21,222 | 12,424 | 6,377 | 77,518 | 117,541 | |||||||||||||||
| Unfunded commitments under existing construction loans |
30,462 | 10,115 | — | — | 40,577 | |||||||||||||||
| Standby letters of credit |
208 | — | — | 200 | 408 | |||||||||||||||
| Unfunded commitments under partnership agreements |
2,540 | — | — | — | 2,540 | |||||||||||||||
| Total commitments |
$ | 61,279 | $ | 22,539 | $ | 6,377 | $ | 77,718 | $ | 167,913 | ||||||||||
Liquidity Management
Liquidity is the ability to meet current and future short-term and long-term financial obligations. Our primary sources of funds consist of investment security principal and interest payments, customer and brokered deposit inflows, loan repayments and maturities, sales of securities, borrowings from the FHLB and utilization of the NexBank line of credit. While maturities and scheduled amortization of loans and securities are usually predictable sources of funds, deposit flows, calls of investment securities and borrowed funds, and prepayments on loans and investment securities are greatly influenced by general interest rates, economic conditions and competition, which can cause those sources of funds to fluctuate.
Management regularly adjusts investments in liquid assets based upon an assessment of expected loan demand, expected deposit flows, yields available on interest-earning deposits and securities, and the objectives of our liquidity management, interest-rate risk and investment policies.
The Company's most liquid assets are cash and cash equivalents followed by available-for-sale securities. The levels of these assets depend on our operating, financing, lending and investing activities during any given period. At September 30, 2025, cash and cash equivalents totaled $79.2 million and unpledged securities classified as available-for-sale had a market value of $225.2 million. The Bank pledged collateral of $542.8 million to support borrowings from the FHLB, with a remaining borrowing capacity of $272.0 million at September 30, 2025. The Bank also has an established discount window borrowing arrangement with the FRB, for which available-for-sale securities with a market value of $18.3 million were pledged as of September 30, 2025, providing a borrowing capacity of $17.5 million. Another source of short-term funding for the Bank is through PCBB's Fed Funds Borrowing Facility, which provides up to $50.0 million of unsecured borrowing for up to ten consecutive days. First Northwest has a $20.0 million borrowing arrangement with NexBank which is secured by First Northwest's personal property assets (with certain exclusions), including all the outstanding shares of First Fed, cash, loans receivable, and limited partnership investments. The remaining borrowing capacity of the NexBank line of credit was $5.0 million at September 30, 2025.
At September 30, 2025, we had commitments to fund $408,000 in standby letters of credit and $158.1 million in undisbursed loans, including $40.6 million in undisbursed construction loan commitments.
CDs due within one year as of September 30, 2025, totaled $448.1 million, or 82.5% of CDs with a weighted-average rate of 3.84%. If these maturing deposits are not renewed, we will seek other sources of funds, including other CDs, non-maturity deposits, and borrowings. We can attract and retain deposits by adjusting the interest rates offered and through sales and marketing efforts in the markets we serve. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on CDs. We believe that our branch network, and the general cash flows from our existing lending and investment activities, will provide adequate short-term and long-term liquidity. For additional information, see the Consolidated Statements of Cash Flows in Item 1 of this Form 10-Q.
First Fed has a diversified deposit base with approximately 62% of deposit account balances held by consumers, 23% held by business and 9% by public fund depositors, and 6% in brokered deposits. The average deposit account balance, excluding brokered and public fund accounts, was $29,000 at September 30, 2025. We estimate that 20-25% of our customer deposit balances are over the $250,000 FDIC insurance limit, representing less than 5% of deposit customers. Management believes that maintaining a diversified deposit base is an important factor in managing and maintaining adequate levels of liquidity.
The Company is a separate legal entity from the Bank and provides for its own liquidity. At September 30, 2025, the Company, on an unconsolidated basis, had liquid assets of $7.7 million. In addition to its operating expenses, the Company is responsible for paying dividends declared, if any, to its shareholders, and for Company stock repurchases, interest payments on subordinated notes held at the Company level, payments on the NexBank revolving credit facility, and commitments to limited partnership investments. The Company may receive dividends or capital distributions from the Bank, although there may be regulatory limitations on the ability of the Bank to pay dividends.
Capital Resources
At September 30, 2025, shareholders' equity totaled $154.5 million, or 7.3% of total assets. Our book value per share of common stock was $16.33 at September 30, 2025, compared to $16.45 at December 31, 2024.
At September 30, 2025, the Bank exceeded all regulatory capital requirements and was considered "well capitalized" under FDIC regulatory capital guidelines.
The following table provides the capital requirements and actual results for First Fed at September 30, 2025.
| Actual |
Minimum Capital Requirements |
Minimum Required to be Well-Capitalized |
||||||||||||||||||||||
| Amount |
Ratio |
Amount |
Ratio |
Amount |
Ratio |
|||||||||||||||||||
| (Dollars in thousands) |
||||||||||||||||||||||||
| Tier 1 leverage capital (to average assets) |
$ | 200,624 | 9.3 | % | $ | 86,091 | 4.0 | % | $ | 107,613 | 5.0 | % | ||||||||||||
| Common equity tier 1 (to risk-weighted assets) |
200,624 | 12.7 | 71,393 | 4.5 | 103,123 | 6.5 | ||||||||||||||||||
| Tier 1 risk-based capital (to risk-weighted assets) |
200,624 | 12.7 | 95,190 | 6.0 | 126,920 | 8.0 | ||||||||||||||||||
| Total risk-based capital (to risk-weighted assets) |
216,586 | 13.7 | 126,920 | 8.0 | 158,650 | 10.0 | ||||||||||||||||||
In order to avoid limitations, based on percentages of eligible retained income, on paying dividends, engaging in share repurchases, and paying discretionary bonuses, the Bank must maintain risk-based capital in an amount greater than the required minimum levels plus a capital conservation buffer, comprised of common equity tier 1 capital ("CET1"), of 2.5% of risk-weighted assets. The Bank's capital conservation buffer was 5.7% at September 30, 2025, exceeding this requirement.
Effect of Inflation and Changing Prices
The consolidated financial statements and related financial data presented in this report have been prepared according to GAAP, which require the measurement of financial and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs and the effect that general inflation may have on both short-term and long-term interest rates. Unlike companies in many other industries, virtually all the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates generally have a more significant impact on a financial institution's performance than do general levels of inflation. Although inflation expectations do affect interest rates, interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There has not been any material change in the market risk disclosures contained in the 2024 Form 10-K.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures.
An evaluation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the "Exchange Act")) was carried out under the supervision and with the participation of the Company's Chief Executive Officer (Principal Executive Officer), Chief Financial Officer (Principal Financial and Accounting Officer), and other members of the Company's management team as of the end of the period covered by this quarterly report. The Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures in effect as of September 30, 2025, were effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is (i) accumulated and communicated to the Company's management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.
(b) Changes in Internal Controls.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, the Company is engaged in legal proceedings in the ordinary course of business, none of which are currently considered to have a material impact on the Company’s financial position or results of operations other than the matters discussed in Note 15 of the Notes to Consolidated Financial Statements contained in Item 1 of this Form 10-Q.
Item 1A. Risk Factors
Except as set forth below, there have been no material changes to the risk factors set forth in Part I. Item 1A of the Company's 2024 Form 10-K.
Our business may be adversely impacted by litigation and regulatory enforcement actions, which could expose us to significant liabilities and/or damage our reputation.
From time to time, we have and may become party to various litigation claims and legal proceedings. Our businesses involve the risk that clients or others may sue us, claiming that we have failed to perform under a contract or otherwise failed to carry out a duty perceived to be owed to them. For example, we are currently engaged in litigation with 3|5|2 Capital and Socotra, as described in more detail in Notes 15 and 16 of the Notes to Consolidated Financial Statements contained in Item 1 of this Form 10-Q. The risk of litigation may be heightened during periods when credit, equity or other financial markets are deteriorating in value or are particularly volatile, or when clients or investors are experiencing losses. In addition, as a publicly-traded company, we are subject to the risk of claims under the federal securities laws, and volatility in our stock price and those of other financial institutions increases this risk. Actions brought against us may result in injunctions, settlements, damages, fines or penalties, which could have an adverse effect on our business, financial condition or results of operations or require changes to our business. Even if we defend ourselves successfully, the cost of litigation may be substantial, and public reports regarding claims made against us may cause damage to our reputation among existing and prospective clients or negatively impact the confidence of counterparties, rating agencies and stockholders, consequently negatively affecting our earnings.
In the ordinary course of our business, we also are subject to various regulatory, governmental and enforcement inquiries, investigations and subpoenas. These may be directed generally to participants in the businesses in which we are involved or may be specifically directed at us. In enforcement matters, claims for disgorgement, the imposition of civil and criminal penalties and the imposition of other remedial sanctions are possible.
Actual outcomes, losses and related expenses of pending legal proceedings may differ materially from assessments and estimates, and may exceed the amount of any reserves we have established, which could adversely affect our reputation, business, financial condition and results of operations.
We are dependent on key personnel and the loss of one or more of those key persons, including the recent departure of our President and Chief Executive Officer, the Chief Banking Officer and Chief Strategy Officer of First Fed, may materially and adversely affect our prospects.
We rely heavily on the efforts and abilities of our executive officers, and certain other key management personnel, which make up our management team. As previously disclosed, our former President, Chief Executive Officer and member of the Board of Directors departed effective July 12, 2025. In addition, the former Chief Banking Officer of First Fed retired on July 2, 2025, and the former Chief Strategy Officer of First Fed departed on August 9, 2025. The loss of the services of these individuals, and the potential loss of any of our current management team, could have a material adverse impact on our business, financial condition, and results of operations. While we believe that our relationship with our remaining management team is good, we cannot guarantee that all members of our management team will remain with our organization. The ability to attract, retain, and season replacements to our management team presents risks to executing our business plan.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities
| (a) |
Not applicable. |
| (b) |
Not applicable. |
| (c) |
The following table summarizes common stock repurchases during the three months ended September 30, 2025: |
| Period |
Total Number of Shares Purchased (1) | Average Price Paid per Share |
Total Number of Shares Repurchased as Part of Publicly Announced Plans (2) |
Maximum Number of Shares that May Yet Be Repurchased Under the Plans |
||||||||||||
| July 1, 2025 - July 31, 2025 |
1,461 | $ | — | — | 846,123 | |||||||||||
| August 1, 2025 - August 31, 2025 |
— | — | — | 846,123 | ||||||||||||
| September 1, 2025 - September 30, 2025 |
165 | — | — | 846,123 | ||||||||||||
| Total |
1,626 | $ | — | — | ||||||||||||
| (1) Shares repurchased by the Company during the quarter represent shares acquired from restricted stock award participants in connection with the cancellation of restricted stock to pay withholding taxes upon vesting totaling 1,461 shares, 0 shares, and 165 shares, respectively, for the periods indicated. |
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| (2) On April 25, 2024, the Company announced that its Board of Directors had authorized the repurchase of up to an additional 944,279 shares of its common stock, or approximately 10% of its shares of common stock issued and outstanding as of April 24, 2024. As of September 30, 2025, a total of 98,156 shares, or 10.4% percent of the shares authorized in the April 2024 stock repurchase plan, have been purchased at an average cost of $10.23 per share, leaving 846,123 shares available for future purchases. No shares were repurchased pursuant to the Company's April 2024 stock repurchase plan during the periods indicated. |
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Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During the fiscal quarter ended September 30, 2025, no director or officer of First Northwest adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.
Item 6. Exhibits
| Exhibit No. |
Exhibit Description |
Filed Herewith |
Form |
Original Exhibit No. |
Filing Date |
| 10.1* | Executive Separation and Release Agreement, dated as of July 9, 2025, between the Company and Matthew P. Deines | 8-K | 10.1 | 7/9/2025 | |
| 10.2* | Letter Agreement, dated as of July 9, 2025, between the Company and Geraldine L. Bullard | 8-K | 10.2 | 7/9/2025 | |
| 10.3* | Executive Separation and Release Agreement, dated as of August 9, 2025, between the Company and Christopher Riffle | X | |||
| 10.4* | Employment Agreement amount First Northwest Bancorp, First Fed Bank and Curt Queyrouze dated September 11, 2025 | 8-K | 10.1 | 9/12/2025 | |
| 31.1 |
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act |
X |
|
|
|
| 31.2 |
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act |
X |
|
|
|
| 32 |
Certification pursuant to Section 906 of the Sarbanes-Oxley Act |
X |
|
|
|
| 101 |
The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2025, formatted in Inline Extensible Business Reporting Language (iXBRL): (1) Consolidated Balance Sheets; (2) Consolidated Statements of Operations; (3) Consolidated Statements of Comprehensive Income; (4) Consolidated Statements of Changes in Shareholders' Equity; (5) Consolidated Statements of Cash Flows; and (6) Selected Notes to Consolidated Financial Statements |
||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | ||||
| * Denotes a management contract or compensatory plan or arrangement. | |||||
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 thereunto duly authorized.
|
|
FIRST NORTHWEST BANCORP |
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| Date: November 6, 2025 |
/s/ Curt Queyrouze |
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|
|
|
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|
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Curt Queyrouze |
|
|
|
President and Chief Executive Officer |
|
|
|
(Principal Executive Officer) |
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|
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|
|
|
| Date: November 6, 2025 |
/s/ Phyllis R. Nomura |
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Phyllis R. Nomura |
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Chief Financial Officer and Executive Vice President |
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(Principal Financial and Accounting Officer) |
