# First Northwest Bancorp: Form 10-Q for the period ended Mar 31, 2025

- Company: [First Northwest Bancorp](/companies/fnwb.md) (CIK 1556727)
- Form: 10-Q
- Filed: 2025-05-12
- Accepted by EDGAR: May 12, 2025, 16:16 ET
- Period: 2025-03-31
- Accession: 0001437749-25-016126
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1556727/000143774925016126/fnwb20250331_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1556727/000143774925016126/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Income tax | 3 months, 2025-01-01 to 2025-03-31 | −$1.1m | us-gaap:IncomeTaxExpenseBenefit |
| Diluted EPS | 3 months, 2025-01-01 to 2025-03-31 | −$1.03 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | −$1.03 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-01-01 to 2025-03-31 | 8,747,422 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2025-01-01 to 2025-03-31 | −$21.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Dividends paid | 3 months, 2025-01-01 to 2025-03-31 | $649.0k | us-gaap:PaymentsOfDividends |
| Share repurchases | 3 months, 2025-01-01 to 2025-03-31 | $0 | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Total assets | at 2025-03-31 | $2.17bn | us-gaap:Assets |
| Total liabilities | at 2025-03-31 | $2.02bn | us-gaap:Liabilities |
| Shareholders' equity | at 2025-03-31 | $146.5m | us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest |

## Management's discussion and analysis

As filed, 58,010 characters.

### 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 "believes," "expects," "anticipates," "estimates" 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, cost of living, unemployment levels, supply chain difficulties 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.

34

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, including 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. The Company's business activities are generally focused on passive investment activities and oversight of the activities of First Fed. The Company has also entered into partnerships to strategically invest in fintech-related businesses.

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 six 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 MWG. 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 March 28, 2025, the agencies announced their intent to issue a proposal to rescind the October 2023 final rule, and to reinstate the CRA framework that existed prior to the October 2023 final 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.

### 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 March 31, 2025 and December 31, 2024

**Assets.** Total assets decreased to $2.17 billion, or 2.7%, at March 31, 2025, from $2.23 billion at December 31, 2024.

Cash and cash equivalents decreased by $2.1 million, or 2.9%, to $70.3 million as of March 31, 2025, compared to $72.5 million as of December 31, 2024.

Investment securities decreased $24.9 million, or 7.3%, to $315.4 million at March 31, 2025, from $340.3 million at December 31, 2024. The decrease was primarily due to maturities and early redemptions within the MBS non-agency portfolio totaling $20.2 million along with other payment activity was partially offset by a portfolio market value increase of $3.1 million during the three months ended March 31, 2025.

Included in MBS non-agency portfolio as of March 31, 2025, were $28.7 million of commercial mortgage-backed securities ("CMBS"), of which 93.4% were in "A" tranches with the remaining 6.6% in "B" tranches. Our largest exposure in the CMBS portfolio balance was to long-term care facilities, which comprised 67.8%, or $19.4 million, of our private label CMBS securities. All of the CMBS had credit enhancements at the current period end ranging from 30.8% to 93.1%, with a weighted-average credit enhancement of 62.6%, which further reduced the risk of loss on these investments.

The investment portfolio, including mortgage-backed securities, had an estimated projected average life of 6.9 years as of both March 31, 2025 and December 31, 2024, and had an estimated average repricing term of 6.2 years as of March 31, 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 4.3 years at March 31, 2025, compared to 3.9 years at December 31, 2024. The investment portfolio was comprised of 55.9% in amortizing securities at March 31, 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 $37.6 million, or 2.2%, to $1.64 billion at March 31, 2025, from $1.68 billion at December 31, 2024. During the three months ended March 31, 2025, commercial business loans decreased $31.7 million, including a $36.2 million decrease to our Northpointe Bank Mortgage Purchase Program ("Northpointe MPP") participation and other repayment activity, partially offset by increases from $6.7 million of organic originations, $5.9 million of draws on existing line of credit commitments and $414,000 of new purchased loans. One-to-four family loans decreased $887,000 during the three months ended March 31, 2025, as repayment activity exceeded $4.5 million in residential construction loans that converted to permanent amortizing loans and new loan originations totaling $1.5 million.

Multi-family loans increased $5.6 million during the three months ended March 31, 2025, as $8.0 million of construction loans converting into permanent amortizing loans exceeded repayments. Auto and other consumer loans increased $5.0 million with auto loan purchases of $11.1 million, manufactured home loan pool purchases of $4.6 million, and additional manufactured home loan purchases of $3.6 million, partially offset by prepayments and scheduled payments. Commercial real estate loans decreased $3.1 million during the three months ended March 31, 2025, with loan charge-offs totaling $5.6 million and repayment activity exceeding $12.3 million of new loan originations and $334,000 of construction loan conversions. Home equity loan outstanding balances increased $97,000 over the prior year end due to $2.5 million of net draws on new and existing line of credit commitments and $1.1 million of home equity loan originations, partially offset by prepayments and scheduled payments.

Construction and land loans decreased $13.2 million, or 16.9%, to $64.9 million at March 31, 2025, from $78.1 million at December 31, 2024, with payment activity totaling $14.0 million and $12.8 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. 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. At March 31, 2025, 39% of construction commitments were secured by one-to-four family residential properties, which are anticipated to convert into amortizing loans upon completion and may be sold at that time.

The following tables show our construction commitments by type and geographic concentrations at the dates indicated:

*(In thousands)*

| March 31, 2025 Construction Commitment | North Olympic Peninsula (1) | Puget Sound Region (2) | Other Washington | California | Total |
| --- | ---: | ---: | ---: | ---: | ---: |
| One-to-four family residential | $7,255 | $37,631 | $— | $— | $44,886 |
| Multi-family residential | 3,900 | 16,612 | 3,261 | — | 23,773 |
| Commercial real estate | 500 | 34,077 | 4,940 | 8,060 | 47,577 |
| Total commitment | $11,655 | $88,320 | $8,201 | $8,060 | $116,236 |
| **Construction Funds Disbursed** |  |  |  |  |  |
| One-to-four family residential | $2,125 | $31,029 | $— | $— | $33,154 |
| Multi-family residential | 1,305 | 5,896 | 2,198 | — | 9,399 |
| Commercial real estate | 269 | 14,742 | 1,608 | — | 16,619 |
| Total disbursed for construction | 3,699 | 51,667 | 3,806 | — | 59,172 |
| Net deferred fees (costs) | 5 | (316) | (12) | (32) | (355) |
| Amortized cost for construction | $3,704 | $51,351 | $3,794 | $(32) | $58,817 |
| **Undisbursed Commitment** |  |  |  |  |  |
| One-to-four family residential | $5,130 | $6,602 | $— | $— | $11,732 |
| Multi-family residential | 2,595 | 10,716 | 1,063 | — | 14,374 |
| Commercial real estate | 231 | 19,335 | 3,332 | 8,060 | 30,958 |
| Total undisbursed | $7,956 | $36,653 | $4,395 | $8,060 | $57,064 |
| **Land Funds Disbursed** |  |  |  |  |  |
| One-to-four family residential | $2,148 | $1,925 | $212 | $— | $4,285 |
| Commercial real estate | 900 | 845 | — | — | 1,745 |
| Total disbursed for land | 3,048 | 2,770 | 212 | — | 6,030 |
| Net deferred fees | 15 | 10 | 5 | — | 30 |
| Amortized cost for land | $3,063 | $2,780 | $217 | $— | $6,060 |

(1) Includes Clallam and Jefferson counties.

(2) Includes Kitsap, Mason, Thurston, Pierce, King, Snohomish, Skagit, Whatcom, and Island counties.

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*(In thousands)*

| December 31, 2024 Construction Commitment | North Olympic Peninsula (1) | Puget Sound Region (2) | Other Washington | Total |
| --- | ---: | ---: | ---: | ---: |
| 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 | 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 three months ended March 31, 2025, the Company added $67.3 million of organic loan originations, of which $31.3 million, or 46.5%, were located in the Puget Sound region, $11.2 million, or 16.7%, on the North Olympic Peninsula, $9.0 million, or 13.3%, in other areas throughout Washington State, and $15.8 million, or 23.5%, in other states. The Company purchased an additional $11.1 million in auto loans, $8.2 million in manufactured home loans, $550,000 in one-to-four family loans and $418,000 in commercial business loans to borrowers located throughout the United States during the three months ended March 31, 2025. The total loan portfolio was composed of 79.4% organic originations and 20.6% purchased loans at March 31, 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 increased to $20.6 million at March 31, 2025, compared to $20.5 million at December 31, 2024. Qualitative factor adjustments related to an increase in nonaccrual commercial business loans and an increase in the average risk rating of multi-family loans resulted in higher loss rates applied to those categories. Mild deterioration in gross domestic product and unemployment estimates further added to the increase in the allowance related to pooled loan balances. The ACLL as a percentage of total loans was 1.24% and 1.20% at March 31, 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 March 31, 2025.

Nonperforming loans decreased $10.2 million, or 33.3%, to $20.4 million at March 31, 2025, from $30.5 million at December 31, 2024, primarily attributable to loan charge-offs totaling $7.7 million and $3.9 million in payments received on commercial construction loans, partially offset by a $633,000 commercial business loan placed on nonaccrual status during the quarter. The increase in charge-off activity was related to underlying collateral deficiencies for two commercial real estate loans and a related commercial business loan totaling $6.2 million. Nonperforming loans to total loans was 1.23% at March 31, 2025, compared to 1.80% at December 31, 2024. The ACLL as a percentage of nonaccrual loans increased to 101% at March 31, 2025, up from 67% at December 31, 2024.

Classified loans decreased $10.9 million, or 25.7%, to $31.6 million at March 31, 2025, from $42.5 million at December 31, 2024, primarily due to charge-offs totaling $7.2 million and $3.9 million in payments received on commercial construction loans included in this category. An $8.1 million construction loan relationship which became classified in the fourth quarter of 2022 and a $7.1 million commercial construction loan relationship which became classified in the second quarter of 2024, account for 48% of the classified loan balance at March 31, 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 these collateral-dependent relationships. The Bank is also closely monitoring a group of commercial business loans that have similar collateral, with 16 loans totaling $1.6 million included in classified loans at March 31, 2025, and an additional seven loans totaling $2.4 million included in the special mention risk grading category. The Bank continues to work with these borrowers to facilitate satisfactory repayment.

In the first quarter 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 $811,000 and commercial construction loan charge-offs totaling $374,000 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 $207,000 during the three months ended March 31, 2025. The Bank's active participation in the program was discontinued in 2023.

Loans receivable, excluding loans held for sale, consisted of the following at the dates indicated:

*(In thousands)*

| Real Estate: | March 31, 2025 | December 31, 2024 | Increase (Decrease) Amount | Percent |
| --- | ---: | ---: | ---: | ---: |
| One-to-four family | $394,428 | $395,315 | $(887) | (0.2)% |
| Multi-family | 338,147 | 332,596 | 5,551 | 1.7 |
| Commercial real estate | 387,312 | 390,379 | (3,067) | (0.8) |
| Construction and land | 64,877 | 78,110 | (13,233) | (16.9) |
| Total real estate loans | 1,184,764 | 1,196,400 | (11,636) | (1.0) |
| **Consumer:** |  |  |  |  |
| Home equity | 79,151 | 79,054 | 97 | 0.1 |
| Auto and other consumer | 273,878 | 268,876 | 5,002 | 1.9 |
| Total consumer loans | 353,029 | 347,930 | 5,099 | 1.5 |
| **Commercial business loans** | 119,783 | 151,493 | (31,710) | (20.9) |
| Total loans receivable | 1,657,576 | 1,695,823 | (38,247) | (2.3) |
| **Less:** |  |  |  |  |
| Derivative basis adjustment | (566) | 188 | (754) | (401.1) |
| Allowance for credit losses on loans | 20,569 | 20,449 | 120 | 0.6 |
| Loans receivable, net | $1,637,573 | $1,675,186 | $(37,613) | (2.2) |

39

The following table summarizes nonperforming assets at the dates indicated:

*(In thousands)*

| Nonaccrual loans: Real estate loans: | March 31, 2025 | December 31, 2024 | Increase (Decrease) Amount | Percent |
| --- | ---: | ---: | ---: | ---: |
| One-to-four family | $1,404 | $1,477 | $(73) | (4.9)% |
| Commercial real estate | 4 | 5,598 | (5,594) | (99.9) |
| Construction and land | 15,280 | 19,544 | (4,264) | (21.8) |
| Total real estate loans | 16,688 | 26,619 | (9,931) | (37.3) |
| Consumer loans: |  |  |  |  |
| Home equity | 54 | 55 | (1) | (1.8) |
| Auto and other consumer | 710 | 700 | 10 | 1.4 |
| Total consumer loans | 764 | 755 | 9 | 1.2 |
| Commercial business | 2,903 | 3,141 | (238) | (7.6) |
| Total nonaccrual loans | $20,355 | $30,515 | $(10,160) | (33.3) |
| **MLTB loans:** |  |  |  |  |
| Commercial real estate | $6,695 | $6,402 | $293 | 4.6 |
| Commercial business | 108 | 111 | (3) | (2.7) |
| Total restructured loans | $6,803 | $6,513 | $290 | 4.5 |
| Nonaccrual loans as a percentage of total loans | 1.23% | 1.80% | (0.57)% | (31.7) |
| Nonperforming MLTB loans included in total nonaccrual loans and total restructured loans above | $108 | $111 | $(3) | (2.7)% |

In the first quarter of 2025, a commercial business loan receivable held by First Northwest 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 and the balance reclassified from BOLI to other assets until reimbursement is received from the issuer. In April, the Bank reinvested the value of the terminated policy into a new BOLI separate life policy.

**Liabilities.** Total liabilities decreased to $2.02 billion at March 31, 2025, from $2.08 billion at December 31, 2024, due to decreases in brokered deposits of $45.0 million and borrowings of $28.9 million, partially offset by an increase in customer deposit balances of $23.0 million.

Deposit account balances decreased $22.0 million, or 1.3%, to $1.67 billion at March 31, 2025 from $1.69 billion at December 31, 2024. During the first three months of 2025, total customer deposit balances increased $23.0 million and brokered deposit balances decreased $45.0 million. Within customer deposit balances, increases in savings accounts of $30.1 million and money market accounts of $10.7 million were partially offset by decreases in customer term certificates of $14.3 million and demand deposit accounts of $3.5 million. Increases in savings and money market accounts were driven by customer behavior as they sought out higher rates offered as term certificate specials matured and specials ended. We utilize brokered CDs 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 quarter of 2025. As a result, the Bank continued offering deposit rate specials to retain existing balances and attract new funds.

FHLB advances decreased $30.0 million, or 10.3% to $260.0 million at March 31, 2025, from $290.0 million at December 31, 2024. The Bank reduced short-term FHLB advances while long-term advances marginally increased to provide additional balance sheet liquidity. 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 decreased $7.4 million to $146.5 million for the three months ended March 31, 2025, due to a $9.0 million net loss recorded during that period, $656,000 of dividends declared and a $425,000 decrease in the post-tax fair market value of derivatives. These decreases were partially offset by an increase in the after-tax fair market values of the available-for-sale investment securities portfolio of $2.4 million. During the first quarter 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 March 31, 2025 and 2024

**General.** The Company recorded a net loss of $9.0 million for the three months ended March 31, 2025, compared to net income of $396,000 for the three months ended March 31, 2024. A $6.8 million increase in provision for credit losses and a $5.7 million increase in noninterest expense were partially offset by a decrease in provision for income tax of $1.6 million and a $1.6 million increase in noninterest income.

**Net Interest Income.** Net interest income decreased $81,000 to $13.9 million for the three months ended March 31, 2025, from $13.9 million for the three months ended March 31, 2024, as declines in loan and interest-earning deposit income outpaced reduced deposit costs.

Average earning assets increased $3.9 million year-over-year. The yield on average interest-earning assets decreased 7 basis points to 5.35% for the three months ended March 31, 2025, compared to 5.42% for the same period in the prior year, due to decreases in average net loans receivable and interest-earning deposit account balances, along with decreased yields on all interest-earning assets.

The average cost of interest-bearing liabilities decreased to 3.05% for the three months ended March 31, 2025, compared to 3.14% for the same period last year, due primarily to lower rates paid on savings accounts, CDs, and advances along with decreases in the average balances of brokered CDs, savings account balances and subordinated debt. Total cost of funds decreased 7 basis points to 2.67% for the three months ended March 31, 2025, from 2.74% for the same period in 2024. The net interest margin remained flat at 2.76% for both the three months ended March 31, 2025 and the same period in 2024.

**Interest Income.** Total interest income decreased $503,000, or 1.8%, to $26.8 million for the three months ended March 31, 2025, from $27.3 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 balances. Interest and fees on loans receivable decreased $536,000, to $22.2 million for the three months ended March 31, 2025, from $22.8 million for the three months ended March 31, 2024, primarily due to a decrease in the average balance of net loans receivable of $19.5 million compared to the prior year, coupled with a decrease in average loan yields to 5.49% for the three months ended March 31, 2025, from 5.51% for the same period in 2024. Average balances in the loan portfolio decreased primarily due to a lower average volume of construction loans partially offset by higher average volumes of one-to-four family, purchased auto and purchased manufactured home 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 12 basis points to 4.63% compared to the same period in 2024, due to floating bond yields and maturities of higher yielding fixed-rate investments.

The following table compares average earning asset balances, associated yields, and resulting changes in interest income for the periods shown:

*(Dollars in thousands)*

|  | Three Months Ended March 31, 2025 Average Balance Outstanding | Yield | 2024 Average Balance Outstanding | Yield | (Decrease) Increase in Interest Income |
| --- | ---: | ---: | ---: | ---: | ---: |
| Loans receivable, net | $1,641,937 | 5.49% | $1,661,420 | 5.51% | $(536) |
| Investment securities | 333,208 | 4.63 | 307,490 | 4.75 | 171 |
| FHLB stock | 13,609 | 9.15 | 12,328 | 9.20 | 25 |
| Interest-earning deposits in banks | 42,917 | 4.55 | 46,583 | 5.57 | (163) |
| Total interest-earning assets | $2,031,671 | 5.35 | $2,027,821 | 5.42 | $(503) |

41

**Interest Expense.** Total interest expense decreased $422,000, or 3.1%, to $13.0 million for the three months ended March 31, 2025, compared to $13.4 million for the three months ended March 31, 2024. The decrease over the first three months of 2024 was the result of a 4-basis point decrease in the cost of total deposits from 2.43% one year prior to 2.39% along with a reduction of brokered CDs. A shift in the deposit mix from savings accounts and brokered CDs to a higher volume of customer CDs and money market accounts resulted in a lower cost of deposits. Interest expense on borrowings increased marginally due to a $25.5 million increase in the average balance, partially offset by a 39-basis point decrease in the cost of advances, primarily FHLB advances, compared to the same period in 2024.

During the three months ended March 31, 2025, interest expense on CDs decreased due to lower average balances of $33.2 million, primarily brokered CDs, along with a 17-basis point increase in the average rates paid, compared to the three months ended March 31, 2024. During the same period, the average balances of money market accounts increased $36.9 million, with a 21-basis point average rate increase, resulting in an increase to interest expense. The average cost of interest-bearing deposit accounts decreased to 2.80% for the three months ended March 31, 2025, from 2.86% for the three months ended March 31, 2024. The Bank continues to use promotional products designed to retain existing deposits and generate new deposits. Promotional rates are regularly reviewed and adjusted. The mix of customer deposit balances shifted from savings accounts towards money market accounts and CDs. Customer CDs represented 27.0% and 25.1% of total deposits at March 31, 2025 and 2024, respectively. Brokered CDs represented 8.3% and 11.5% of total deposits at March 31, 2025 and 2024, respectively.

The following table details average balances, cost of funds and the change in interest expense for the periods shown:

*(Dollars in thousands)*

|  | Three Months Ended March 31, 2025 Average Balance Outstanding | Rate | 2024 Average Balance Outstanding | Rate | (Decrease) Increase in Interest Expense |
| --- | ---: | ---: | ---: | ---: | ---: |
| Interest-bearing demand deposits | $168,414 | 0.63% | $165,379 | 0.45% | $73 |
| Money market accounts | 414,425 | 2.29 | 377,505 | 2.08 | 396 |
| Savings accounts | 216,499 | 1.47 | 235,784 | 1.63 | (170) |
| Certificates of deposit, customer | 451,936 | 4.06 | 437,525 | 4.13 | 28 |
| Certificates of deposit, brokered | 158,269 | 4.68 | 205,923 | 4.94 | (702) |
| Advances | 279,500 | 4.14 | 252,912 | 4.60 | (37) |
| Subordinated debt | 38,370 | 4.06 | 39,446 | 4.02 | (10) |
| Total interest-bearing liabilities | $1,727,413 | 3.05 | $1,714,474 | 3.14 | $(422) |

**Provision for Credit Losses.** The Company recorded a $7.8 million loan loss provision and a $15,000 unfunded commitment provision for the three months ended March 31, 2025. This compares to a $1.2 million loan loss provision offset by a $269,000 unfunded commitment provision recapture for the three months ended March 31, 2024. The higher provision for credit losses on loans compared to the same period in 2024 was mainly due to underlying collateral deficiencies for two commercial real estate loans, a commercial business loan, a group of commercial equipment loans and consumer unsecured loans resulting in net charge-offs totaling $7.7 million for the three-month period. Increases in qualitative factor adjustments and a mild increase in factors related the general economic outlook applied to the remaining loan portfolio balance at March 31, 2025 also contributed to the higher provision. The increase in unfunded commitment provision compared to the same period in 2024 was due to higher balances.

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:

*(Dollars in thousands)*

|  | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Provision for credit losses on loans | $7,770 | $1,239 |
| Net charge-offs | (7,650) | (791) |
| Allowance for credit losses on loans | 20,569 | 17,958 |
| Allowance for credit losses on loans as a percentage of total loans receivable at period end | 1.24% | 1.05% |
| Total nonaccrual loans | 20,355 | 19,481 |
| Allowance for credit losses on loans as a percentage of nonaccrual loans at period end | 101% | 92% |
| Nonaccrual loans and accruing loans 90 days or more past due as a percentage of total loans receivable | 1.23% | 1.64% |
| Total loans receivable | $1,657,576 | $1,711,442 |
| Provision for (recapture of) credit losses on unfunded commitments | $15 | $(269) |
| Reserve for unfunded commitments | 614 | 548 |
| Unfunded loan commitments | 175,100 | 148,736 |

**Noninterest Income.** Noninterest income increased $1.6 million, or 72.6%, to $3.8 million for the three months ended March 31, 2025, from $2.2 million for the three months ended March 31, 2024. The increase was primarily due to income from 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. As a result of the conversion of lower-yielding BOLI policies in 2024, there was a period-over-period increase in BOLI cash surrender value.

The following table provides a detailed analysis of the changes in the components of noninterest income for the periods shown:

*(Dollars in thousands)*

|  | Three Months Ended March 31, 2025 | 2024 | Increase (Decrease) Amount | Percent |
| --- | ---: | ---: | ---: | ---: |
| Loan and deposit service fees | $1,106 | $1,102 | $4 | 0.4% |
| Sold loan servicing fees and servicing rights mark-to-market | 195 | 219 | (24) | (11.0) |
| Net gain on sale of loans | 11 | 52 | (41) | (78.8) |
| Increase in BOLI cash surrender value | 372 | 243 | 129 | 53.1 |
| Income from BOLI death benefit, net | 1,059 | — | 1,059 | 100.0 |
| Other income | 1,034 | 572 | 462 | 80.8 |
| Total noninterest income | $3,777 | $2,188 | $1,589 | 72.6 |

**Noninterest Expense.** Noninterest expense increased $5.7 million, or 39.8%, to $20.0 million for the three months ended March 31, 2025, compared to $14.3 million for the three months ended March 31, 2024. The increase in expenses compared to the same period in 2024 is mainly due to a $5.8 million accrued legal reserve included in other expense and an increase in occupancy and equipment due to additional rent related to a sale-leaseback transaction in the second quarter of 2024. These increases were partially offset by lower compensation and benefit costs due to a smaller workforce and lower professional fees. The Company continues to focus on controlling compensation expense and reducing advertising and other discretionary spending to improve earnings.

The following table provides an analysis of the changes in the components of noninterest expense for the periods shown:

*(Dollars in thousands)*

|  | Three Months Ended March 31, 2025 | 2024 | Increase (Decrease) Amount | Percent |
| --- | ---: | ---: | ---: | ---: |
| Compensation and benefits | $7,715 | $8,128 | $(413) | (5.1)% |
| Data processing | 2,011 | 1,944 | 67 | 3.4 |
| Occupancy and equipment | 1,592 | 1,240 | 352 | 28.4 |
| Supplies, postage, and telephone | 298 | 293 | 5 | 1.7 |
| Regulatory assessments and state taxes | 479 | 513 | (34) | (6.6) |
| Advertising | 265 | 309 | (44) | (14.2) |
| Professional fees | 777 | 910 | (133) | (14.6) |
| FDIC insurance premium | 434 | 386 | 48 | 12.4 |
| Other expense | 6,429 | 580 | 5,849 | 1,008.4 |
| Total noninterest expense | $20,000 | $14,303 | $5,697 | 39.8 |

**Provision for Income Tax.** An income tax benefit of $1.1 million was recorded for the three months ended March 31, 2025, compared to an expense of $447,000 for the three months ended March 31, 2024, due to a period-over-period decrease in income before taxes of $11.0 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 March 31, 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 in the table as loans carrying a zero yield.

*(Dollars in thousands)*

| Interest-earning assets: | Three Months Ended March 31, 2025 Average Balance Outstanding | Interest Earned/ Paid | Yield/ Rate | 2024 Average Balance Outstanding | Interest Earned/ Paid | Yield/ Rate |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Loans receivable, net (1) (2) | $1,641,937 | $22,231 | 5.49% | $1,661,420 | $22,767 | 5.51% |
| Total investment securities | 333,208 | 3,803 | 4.63 | 307,490 | 3,632 | 4.75 |
| FHLB dividends | 13,609 | 307 | 9.15 | 12,328 | 282 | 9.20 |
| Interest-earning deposits in banks | 42,917 | 482 | 4.55 | 46,583 | 645 | 5.57 |
| Total interest-earning assets (3) | 2,031,671 | 26,823 | 5.35 | 2,027,821 | 27,326 | 5.42 |
| Noninterest-earning assets | 143,077 |  |  | 138,366 |  |  |
| Total average assets | $2,174,748 |  |  | $2,166,187 |  |  |
| **Interest-bearing liabilities:** |  |  |  |  |  |  |
| Interest-bearing demand deposits | $168,414 | $260 | 0.63 | $165,379 | $187 | 0.45 |
| Money market accounts | 414,425 | 2,345 | 2.29 | 377,505 | 1,949 | 2.08 |
| Savings accounts | 216,499 | 783 | 1.47 | 235,784 | 953 | 1.63 |
| Certificates of deposit, customer | 451,936 | 4,522 | 4.06 | 437,525 | 4,494 | 4.13 |
| Certificates of deposit, brokered | 158,269 | 1,827 | 4.68 | 205,923 | 2,529 | 4.94 |
| Total interest-bearing deposits (4) | 1,409,543 | 9,737 | 2.80 | 1,422,116 | 10,112 | 2.86 |
| Advances | 279,500 | 2,855 | 4.14 | 252,912 | 2,892 | 4.60 |
| Subordinated debt | 38,370 | 384 | 4.06 | 39,446 | 394 | 4.02 |
| Total interest-bearing liabilities | 1,727,413 | 12,976 | 3.05 | 1,714,474 | 13,398 | 3.14 |
| Noninterest-bearing deposits (4) | 243,569 |  |  | 249,283 |  |  |
| Other noninterest-bearing liabilities | 47,296 |  |  | 40,563 |  |  |
| Total average liabilities | 2,018,278 |  |  | 2,004,320 |  |  |
| Average equity | 156,470 |  |  | 161,867 |  |  |
| Total average liabilities and equity | $2,174,748 |  |  | $2,166,187 |  |  |
| Net interest income |  | $13,847 |  |  | $13,928 |  |
| Net interest rate spread |  |  | 2.30 |  |  | 2.28 |
| Net earning assets | $304,258 |  |  | $313,347 |  |  |
| Net interest margin (5) |  |  | 2.76 |  |  | 2.76 |
| Average interest-earning assets to average interest-bearing liabilities | 117.6% |  |  | 118.3% |  |  |

(1) The average loans receivable, net balances include nonaccrual loans. (2) Interest earned on loans receivable includes net deferred costs of ($338,000) and ($171,000) for the three months ended March 31, 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 2.39% and 2.43% for the three months ended March 31, 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.

*(In thousands)*

| Interest-earning assets: | Three Months Ended March 31, 2025 Compared to March 31, 2024 Increase (Decrease) Due to Volume | Rate | Total Increase (Decrease) |
| --- | ---: | ---: | ---: |
| Loans receivable, net | $(360) | $(176) | $(536) |
| Investments | 285 | (114) | 171 |
| FHLB stock | 28 | (3) | 25 |
| Other (1) | (52) | (111) | (163) |
| Total interest-earning assets | $(99) | $(404) | $(503) |
| **Interest-bearing liabilities:** |  |  |  |
| Interest-bearing demand deposits | $1 | $72 | $73 |
| Money market accounts | 185 | 211 | 396 |
| Savings accounts | (81) | (89) | (170) |
| Certificates of deposit, customer | 126 | (98) | 28 |
| Certificates of deposit, brokered | (591) | (111) | (702) |
| Advances | 291 | (328) | (37) |
| Subordinated debt | (13) | 3 | (10) |
| Total interest-bearing liabilities | $(82) | $(340) | $(422) |
| Change in net interest income | $(17) | $(64) | $(81) |

(1) Includes interest-earning deposits (cash) at other financial institutions.

### 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 three months ended March 31, 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 March 31, 2025, our scheduled maturities of contractual obligations were as follows:

*(In thousands)*

|  | Within 1 Year | After 1 Year Through 3 Years | After 3 Years Through 5 Years | Beyond 5 Years | Total Balance |
| --- | ---: | ---: | ---: | ---: | ---: |
| Certificates of deposit | $500,790 | $82,031 | $5,788 | $— | $588,609 |
| FHLB advances | 130,000 | 105,000 | 25,000 | — | 260,000 |
| Line of credit | 12,500 | — | — | — | 12,500 |
| Subordinated debt obligation | — | — | — | 34,591 | 34,591 |
| Operating leases | 1,113 | 2,284 | 2,050 | 11,819 | 17,266 |
| Borrower taxes and insurance | 2,583 | — | — | — | 2,583 |
| Deferred compensation | 144 | 247 | 242 | 728 | 1,361 |
| Total contractual obligations | $647,130 | $189,562 | $33,080 | $47,138 | $916,910 |

### Commitments and Off-Balance Sheet Arrangements

The following table summarizes our commitments and contingent liabilities with off-balance sheet risks as of March 31, 2025:

*(In thousands)*

|  | Amount of Commitment by Expiration Within 1 Year | After 1 Year Through 3 Years | After 3 Years Through 5 Years | Beyond 5 Years | Total Amounts Committed |
| --- | ---: | ---: | ---: | ---: | ---: |
| Unfunded commitments under lines of credit | $16,755 | $19,020 | $8,008 | $74,392 | $118,175 |
| Unfunded commitments under existing construction loans | 35,519 | 21,406 | — | — | 56,925 |
| Standby letters of credit | 208 | — | — | 200 | 408 |
| Unfunded commitments under partnership agreements | 3,035 | — | — | — | 3,035 |
| Total commitments | $55,517 | $40,426 | $8,008 | $74,592 | $178,543 |

### 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 our 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.

Our 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 March 31, 2025, cash and cash equivalents totaled $70.3 million and unpledged securities classified as available-for-sale had a market value of $273.4 million. The Bank pledged collateral of $538.3 million to support borrowings from the FHLB, with a remaining borrowing capacity of $217.6 million at March 31, 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 $18.5 million were pledged as of March 31, 2025, providing a borrowing capacity of $17.9 million. 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 $7.5 million at March 31, 2025.

At March 31, 2025, we had commitments to fund $408,000 in standby letters of credit and $175.1 million in undisbursed loans, including $57.1 million in undisbursed construction loan commitments.

CDs due within one year as of March 31, 2025, totaled $500.8 million, or 85.1% of CDs with a weighted-average rate of 4.11%. 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, 22% held by business and 8% by public fund depositors, and 8% in brokered deposits. The average deposit account balance, excluding brokered and public fund accounts, was $28,000 at March 31, 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 March 31, 2025, the Company, on an unconsolidated basis, had liquid assets of $865,000. 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 March 31, 2025, shareholders' equity totaled $146.5 million, or 6.7% of total assets. Our book value per share of common stock was $15.52 at March 31, 2025, compared to $16.45 at December 31, 2024.

At March 31, 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 March 31, 2025.

*(Dollars in thousands)*

|  | Actual Amount | Ratio | Minimum Capital Requirements Amount | Ratio | Minimum Required to be Well-Capitalized Amount | Ratio |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Tier 1 leverage capital (to average assets) | $198,433 | 9.0% | $87,772 | 4.0% | $109,715 | 5.0% |
| Common equity tier 1 (to risk-weighted assets) | 198,433 | 12.1 | 73,776 | 4.5 | 106,565 | 6.5 |
| Tier 1 risk-based capital (to risk-weighted assets) | 198,433 | 12.1 | 98,368 | 6.0 | 131,157 | 8.0 |
| Total risk-based capital (to risk-weighted assets) | 218,878 | 13.4 | 131,157 | 8.0 | 163,946 | 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.

### 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.

## Controls and procedures

As filed, 3,570 characters.

(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 March 31, 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.

There have been no changes in the Company's internal control over financial reporting (as defined in 13a-15(f) of the Exchange Act) that occurred during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

The Company intends to continually review and evaluate the design and effectiveness of its disclosure controls and procedures and to improve its controls and procedures over time and to correct any deficiencies that it may discover in the future. The goal is to ensure that senior management has timely access to all material financial and non-financial information concerning the Company's business. While the Company believes the present design of its disclosure controls and procedures is effective to achieve its goal, future events affecting its business may cause the Company to modify its disclosure controls and procedures. The Company does not expect that its disclosure controls and procedures and internal control over financial reporting will prevent every error or instance of fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns in controls or procedures can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

Filed May 12, 2025.
Source: SEC EDGAR, the filing index for accession 0001437749-25-016126. Last ingested by Listed: Nov 5, 2026, 15:51 ET. No prices; not investment advice.