[8-K] First Northwest Bancorp Reports Material Event

Rhea-AI Filing Summary

Event: On 17 Jul 2025 First Fed Bank, the banking subsidiary of First Northwest Bancorp (FNWB), executed a Settlement Agreement with its bankrupt borrowers—Creative Technologies, Water Station Management, Refreshing USA and Ideal Property Investments—and their unsecured creditors.

Key terms: the Bank will (i) release certain liens on debtor assets and (ii) pay between $2.87 million and $5.74 million, with the exact figure tied to the percentage of unsecured creditors that grant mutual releases under the Chapter 11 liquidation plan.

Financial impact: FNWB recorded a $5.8 million non-interest expense reserve in Q1-25, covering the maximum payout range. Management intends to seek reimbursement from insurance carriers, which could mitigate the cash outflow.

Implications: The settlement resolves the November 2024 adversary proceeding alleging constructive fraudulent transfer, removing litigation risk, future legal costs and management distraction. Because the liability is already reserved, incremental earnings impact should be minimal, while potential insurance recovery offers upside.

Insights

Litigation Risk Analyst

TL;DR: Settlement closes legal exposure at a cost already reserved, reducing headline risk.

By agreeing to pay no more than $5.74 m—slightly below the $5.8 m reserve—FNWB eliminates an adversary proceeding that could have dragged on, incurred escalating legal fees and jeopardised collateral value. The mutual releases protect the bank from related claims, and releasing liens is a reasonable trade-off given the borrowers are in liquidation. Insurance reimbursement, while not guaranteed, could generate a recovery, turning part of the reserve into earnings. Overall risk profile improves.

Bank Equity Analyst

TL;DR: Financially neutral; strategic positive.

The charge was booked in Q1-25, so GAAP earnings going forward should not be hit unless payout exceeds the upper cap, which seems unlikely. Cash usage tightens liquidity modestly but is manageable for FNWB’s size. The greater benefit is removing uncertainty that could weigh on the stock’s valuation multiple. Any successful insurance claim would lift book value. I view the news as modestly constructive but not a catalyst for material earnings revisions.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

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

Date of Report (Date of earliest event reported): July 17, 2025

FIRST NORTHWEST BANCORP

(Exact name of registrant as specified in its charter)

Washington		001-36741		46-1259100
(State or other jurisdiction of incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

105 West 8th Street, Port Angeles, Washington		98362
(Address of principal executive offices)		(Zip Code)

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

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

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

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

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

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

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

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

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

Emerging growth company  ☐

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

Item 8.01 Other Events

As First Northwest Bancorp (the “Company”) previously disclosed, on August 27, 2024, involuntary bankruptcy proceedings were commenced against Creative Technologies, LLC, Water Station Management, LLC and Refreshing USA, LLC (collectively the “OpCo Debtors”), certain of which were borrowers of First Fed Bank (the “Bank”), the bank subsidiary of the Company. 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 $2.87 million and not more than $5.74 million, with the amount within that range determined by the percentage of certain unsecured creditors of the OpCo Debtors that enter into a mutual release of all claims related to the Debtors with the Bank and the Company under the OpCo Debtors’ Chapter 11 plan of liquidation. The Bank and the Company have determined that it is in the best interest of the Bank, the Company and the shareholders of the Company to enter into the Settlement Agreement to eliminate the risks, costs and distraction related to the Adversary Proceeding or any other claims of the parties.

The Bank reserved $5.8 million for this matter in the first quarter of 2025 as a noninterest expense, and the Bank intends to pursue reimbursement from its insurance carriers.

SIGNATURES

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

			FIRST NORTHWEST BANCORP
Date:	July 21, 2025		/s/ Geraldine L. Bullard
			Geraldine L. Bullard
			Interim Chief Executive Officer, Chief Operating Officer and Executive Vice President

FAQ

What did First Northwest Bancorp (FNWB) disclose in its July 17, 2025 8-K?

FNWB announced a settlement that resolves an adversary bankruptcy proceeding with certain borrowers and creditors.

How much will FNWB pay under the settlement agreement?

The Bank will pay not less than $2.87 million and not more than $5.74 million, depending on creditor participation.

Has FNWB already reserved for the settlement cost?

Yes. A $5.8 million reserve was recorded as a non-interest expense in Q1 2025.

Why did FNWB choose to settle the adversary proceeding?

Management believes settlement eliminates litigation risks, costs and distractions, benefiting shareholders.

Will insurance cover any of the settlement payments?

The Bank intends to seek reimbursement from its insurance carriers, but recovery amounts are not yet determined.