GlobeNewswire Inc | Oct 28, 2020 09:00AM EDT

October 28, 2020

PORT ANGELES, Wash., Oct. 28, 2020 (GLOBE NEWSWIRE) -- First Northwest Bancorp (Nasdaq: FNWB) (Company), the holding company for First Federal Savings and Loan Association of Port Angeles (Bank or "First Federal"), today reported an increase in net income of 86.0% to $3.7 million, or $0.40 per diluted share, for the third quarter of 2020, compared to net income of $2.0 million, or $0.21 per diluted share, for the second quarter of 2020, and an increase of 46.4% compared to $2.5 million, or $0.25 per diluted share, for the third quarter of 2019. Third quarter results reflected strong loan and deposit growth, net interest margin expansion and improved efficiency. For the first nine months of 2020, net income was $6.5 million, or $0.69 per diluted share, compared to $6.8 million, or $0.68 per diluted share, for the first nine months of 2019.

The Company also announced that its Board of Directors increased the regular quarterly cash dividend by 20% to $0.06 per common share outstanding, payable on November 27, 2020, to shareholders of record as of the close of business on November 13, 2020. The Board of Directors also approved a share repurchase plan of 10% of outstanding shares.

In a quarter of pandemic-related economic challenges, we delivered excellent results, as we continue to support customers, communities and our employees. Our third quarter financial performance demonstrates the strength of our franchise, with pre-tax, pre-provision for loan losses income increasing 121% over the third quarter a year ago, led by significant mortgage refinance activity and a meaningful reduction in deposit cost of funds, stated Matthew P. Deines, President and CEO. Additionally, asset quality at quarter end remained solid, with few delinquencies in the loan portfolio. However, we continued to build our reserves in response to the pandemic and the economic impact on our customers and communities.

The sectors most heavily impacted include hospitality; restaurant and food services; and lessors of commercial real estate to hospitality, restaurant, and retail establishments. At September 30, 2020, the Companys exposure as a percentage of the total loan portfolio to these industries was 4.9%, 0.2%, and 4.6%, respectively.

Our participation in the Small Business Administrations (SBA) Paycheck Protection Program (PPP) helped serve the needs of our customers and our local communities, Deines continued. Our role as a community bank not only allowed us to assist approximately 515 customers and originate $32.2 million in loans, but also added new relationships with strong future growth opportunities. The Bank is now processing applications for PPP loan forgiveness for customers. We expect the timing of such forgiveness will positively impact fourth quarter 2020 operating results for us, as well as all participating financial institutions.

In addition to PPP lending, we implemented additional programs to support our customers experiencing financial hardship as a result of the pandemic. These assistances included payment forbearance agreements with some customers for periods of up to six months. We deferred payment on 346 loans totaling $175.0 million through September 30, 2020. As of October 26, 2020, the deferral period had ended or payments voluntarily resumed for approximately 79% of these loans, of which 99% have resumed normal payments, with only 2% requesting a second deferral period, added Deines.

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

% of Total Loan Deferred Loan Number of Portfolio Balance Loans (In thousands)June 30, 2020 12.9 % $ 128,420 297September 30, 13.9 149,542 1832020October 26, 2020 8.3 87,343 74

Third Quarter 2020 Highlights (at or for the quarter ended September30, 2020)

-- Third quarter net income increased to $3.7 million, compared to $2.0 million in the preceding quarter and $2.5 million in the year ago quarter. -- Diluted earnings per share was $0.40, up from $0.21 per share in the preceding quarter and $0.25 per share when compared to the third quarter a year ago. -- Provision for loan losses was $1.4 million in the third quarter, compared to $1.5 million in the second quarter of 2020 and a recapture of loan losses of $170,000 in the third quarter of 2019. -- Loans receivable increased 7.6% to $1.06 billion at September 30, 2020, compared to $986.4 million at June 30, 2020, and increased 26.2% compared to $841.4 million a year ago, primarily due to growth in real estate and commercial business loans, including PPP loans. -- Deposits increased 7.2% during the quarter and increased 29.2% from one year prior, to $1.25 billion at September 30, 2020, due to successful organic and wholesale deposit-gathering strategies, including significant growth in noninterest-bearing deposits. -- The cost of deposits for the third quarter decreased to 0.45% from 0.72% for second quarter 2020 and 0.85% in the third quarter of 2019. -- Gain on sale of mortgage loans was $1.7 million for the third quarter compared to $2.0 million in the previous quarter and $655,000 in the third quarter of 2019 reflecting strong quarterly mortgage originations, including refinance activity. -- During the third quarter, the Company repurchased 141,793 shares of common stock at an average price of $11.72 per share for a total of $1.7 million under the 2019 Stock Repurchase Plan approved in December 2019. The 2019 Stock Repurchase Plan was completed in September 2020. -- The Board of Directors approved a new stock repurchase plan of up to 1,023,420 shares, or approximately 10% of shares outstanding, to commence in November 2020.

Balance Sheet Review

Total assets increased $85.8 million, or 5.8%, to $1.56 billion, at September30, 2020, compared to $1.48 billion at June 30, 2020, and increased $314.4 million, or 25.1%, compared to $1.25 billion, at September30, 2019.

Investment securities increased $4.8 million to $369.1 million, at September 30, 2020, and increased $117.9 million compared to $251.2 million, at September 30, 2019. At September 30, 2020, municipal bonds totaled $97.1 million and comprised the largest portion of the investment portfolio at 26.3%. The estimated average life of the total investment securities portfolio was 6.7 years, and the average repricing term was approximately 4.4 years.

Securities consisted of the following at the dates indicated

September June 30, September Three One Year 30, 2020 2020 30, 2019 Month Change Change (In thousands) Available forSale at Fair ValueMunicipal bonds $ 97,143 $ 107,610 $ 10,406 $ (10,467 ) $ 86,737 U.S. governmentagency issuedasset-backed 73,618 60,819 25,266 12,799 48,352 securities (ABSagency)Corporate issuedasset-backed 32,747 39,804 37,096 (7,057 ) (4,349 )securities (ABScorporate)Corporate issueddebt securities 33,230 22,428 9,636 10,802 23,594 (Corporate debt)U.S. SmallBusiness 23,864 23,547 29,815 317 (5,951 )Administrationsecurities (SBA)Mortgage-backed securities:U.S. governmentagency issuedmortgage-backed 92,402 102,647 129,726 (10,245 ) (37,324 )securities (MBSagency)Corporate issuedmortgage-backed 16,107 7,418 9,251 8,689 6,856 securities (MBScorporate)Total securitiesavailable for $ 369,111 $ 364,273 $ 251,196 $ 4,838 $ 117,915 sale Held to Maturityat Amortized CostMunicipal bonds $ ? $ ? $ 7,041 $ ? $ (7,041 )SBA ? ? 138 ? (138 )Mortgage-backed securities:MBS Agency ? ? 30,470 ? (30,470 )Total securities $ ? $ ? $ 37,649 $ ? $ (37,649 )held to maturity

The company is focused on growing the loan portfolio and supporting this growth with core deposits and other low-cost funding sources, said Geri Bullard, EVP/Chief Financial Officer. Additionally, we continue to manage the investment portfolio for liquidity and generation of interest income.

Total loans, excluding loans held for sale, increased $75.1 million, or 7.6%, to $1.06 billion at September30, 2020, from $986.4 million at June30, 2020, and increased $220.2 million, or 26.2%, from $841.1 million a year ago. The collective efforts of our lending team during the quarter resulted in significant increases in loan balances, said Randy Riffle, EVP/Chief Lending Officer. Additionally, participation in the SBAs Paycheck Protection, up until the end of the program on August 8, 2020, also helped fuel loan production with $1.5 million in new PPP loans this quarter.

The Company originated $41.1 million in residential mortgages during the quarter and sold $48.0 million, with an average gross margin on sale of mortgage loans of approximately 2.76%. This production compares to residential mortgage originations of $56.6 million in the preceding quarter with sales of $61.1 million. The activity in the mortgage market continued to exceed historical volumes in the third quarter of 2020, especially for refinances of existing mortgages at incredibly low rates, said Kelly Liske, Chief Banking Officer.

Loans receivable consisted of the following at the dates indicated

September June 30, September Three One Year 30, 2020 2020 30, 2019 Month Change Change (In thousands) Real Estate: One to four $ 317,755 $ 325,349 $ 302,337 $ (7,594 ) $ 15,418 familyMulti-family 127,569 103,279 62,173 24,290 65,396 Commercial real 283,390 267,233 254,058 16,157 29,332 estateConstruction and 75,204 58,153 64,954 17,051 10,250 landTotal real 803,918 754,014 683,522 49,904 120,396 estate loans Consumer: Home equity 34,120 33,696 36,898 424 (2,778 )Auto and other 111,782 109,214 111,312 2,568 470 consumerTotal consumer 145,902 142,910 148,210 2,992 (2,308 )loans Commercial 123,036 99,477 14,325 23,559 108,711 business Total loans 1,072,856 996,401 846,057 76,455 226,799 Less: Net deferred 2,628 1,842 117 786 2,511 loan feesPremium onpurchased loans, (4,196 ) (3,901 ) (4,649 ) (295 ) 453 netAllowance for 13,007 12,109 9,443 898 3,564 loan lossesTotal loans $ 1,061,417 $ 986,351 $ 841,146 $ 75,066 $ 220,271 receivable, net

The Company continues to monitor the sectors that have been most heavily impacted by the COVID-19 pandemic. The table below presents selected information on loans to these industries as of September 30, 2020.

% of NumberIndustry Total Loan of Average Loan Balance Loans Loan-to-Value Portfolio (In thousands)Hospitality 4.9 % $ 48,855 15 61.3 %Restaurant and food services 0.2 2,026 6 61.8 Lessors of commercial realestate to hospitality, 4.6 46,527 26 53.3 restaurant, and retailestablishments

Total deposits increased $84.1 million, or 7.2%, to $1.25 billion at September30, 2020, compared to $1.17 billion at June30, 2020 and increased $283.8 million, or 29.2%, when compared to $970.7 million a year ago. Savings accounts decreased 1.1% compared to a year ago, to $171.9 million at September30, 2020, and represented 13.7% of total deposits; transaction accounts increased 42.3% compared to a year ago to $390.9 million at September30, 2020, and account for 31.2% of total deposits; money market accounts increased 63.7% compared to a year ago to $398.1 million, and represented 31.7% of total deposits, and certificates of deposit increased 5.2% compared to a year ago to $293.5 million at quarter-end, and represent 23.4% of total deposits.

Deposits were up during the quarter due to higher transaction and money market account balances, said Bullard. We continue to strategically utilize brokered certificates of deposit ("brokered CDs") as an additional funding source to manage overall funding costs and interest rate risk. We held $92.6 million, or 7.4% of total deposits, in brokered CDs included in our balance of certificates of deposit at September30, 2020, and $86.3, or 7.4% of total deposits in brokered CDs at June30, 2020. The weighted-average cost of brokered CDs was 0.51% for the third quarter of 2020, compared to 1.12% for the previous quarter. We were able to lower our total cost of funds over the quarter by enhancing our deposit mix toward noninterest-bearing and other core deposits as well as reducing the cost and level of wholesale funding. Total cost of funds improved to 0.50% for the third quarter of 2020 compared to 0.74% for the second quarter of 2020.

Deposits consisted of the following at the dates indicated:

September June 30, September Three One Year 30, 2020 2020 30, 2019 Month Change Change (In thousands) Savings $ 171,905 $ 175,749 $ 173,786 $ (3,844 ) $ (1,881 )Transaction 390,867 339,151 274,660 51,716 116,207 accountsMoney market 398,144 330,261 243,189 67,883 154,955 accountsCertificates 293,540 325,164 279,065 (31,624 ) 14,475 of depositTotal deposits $ 1,254,456 $ 1,170,325 $ 970,700 $ 84,131 $ 283,756

Total shareholders' equity increased to $180.7 million at September30, 2020, compared to $176.3 million three months earlier, and $177.3 million a year earlier. The quarter-over-quarter increase in equity was due to earnings of $3.7 million and an increase to other comprehensive income based on the improvement in the market value of the investment portfolio offset by the cost of stock buybacks. Book value per common share increased to $17.65 at September30, 2020, compared to $17.07 at June30, 2020 and $16.42 at September 30, 2019.

Operating Results

In the third quarter of 2020, the Company generated a return on average assets ("ROAA") of 0.99%, and a return on average equity ("ROAE") of 8.22%, compared to 0.56% and 4.60%, respectively, in the second quarter of 2020, and 0.81% and 5.65%, respectively, in the third quarter a year ago.

Total interest income increased to $13.4 million for the third quarter of 2020, compared to $12.4 million in the previous quarter and $12.3 million in the third quarter of 2019. The increases are due to an increase in interest and fees on loans given the loan growth which offset a small decrease in investment interest income. Quarter over quarter, the yield on investment securities decreased 7 basis points while the yield on average loans receivable decreased by 5 basis points. Total interest expense was $1.6 million for the third quarter of 2020, compared to $2.2 million in the second quarter of 2020, and $2.8 million in the third quarter a year ago. The decrease in interest expense was due to the decline in the cost of deposits to 45 basis points from 72 basis points in the prior quarter and from 85 basis points the quarter one year ago.

Net interest income, before provision for loan losses, increased 16.3% during the quarter to $11.8 million, compared to $10.1 million for the preceding quarter and increased 24.7% compared to $9.4 million in the third quarter a year ago. For the first nine months of 2020, net interest income, before the provision for loan losses, increased 9.0% to $31.1 million, compared to $28.7 million for the first nine months of 2019. Due to the COVID-19 pandemic and the related impact to the business environment, the Company recorded a $1.4 million provision for loan losses during the third quarter of 2020. This compares to a provision for loan losses of $1.5 million for the preceding quarter, and a credit to the provision for loan losses of $170,000 for the third quarter of 2019. Year-to-date, the provision for loan losses was $4.1 million, compared to $420,000 for the nine-month period one year earlier.

The net interest margin expanded 26 basis point to 3.36% for the third quarter of 2020, compared to 3.10% for the second quarter of 2020, and increased 13 basis points compared to 3.23% for the third quarter in 2019. Our net interest margin expansion during the quarter is a result of our efforts to improve our earning asset mix by increasing the level of our commercial loans as well as reducing our cost of funds, said Bullard. For the first nine months of 2020, the net interest margin was 3.20% compared to 3.23% in the first nine months of 2019 due to reduced yields on loans and investments.

The yield on earning assets increased 3 basis points to 3.82% for the third quarter of 2020, compared to 3.79% for the second quarter of 2020, and decreased from 4.20% for the third quarter in 2019. The decrease was due to lower yields on the investment portfolio and average loans, which was offset by higher average loan balances. The yield on the loan portfolio increased to 4.45% for the third quarter 2020, from 4.40% for the second quarter 2020, and decreased from 4.68% for the third quarter of 2019. The cost of interest-bearing liabilities decreased 29 basis points to 0.60% for the third quarter of 2020 compared to 0.89% for the second quarter of 2020 and decreased 67 basis points from 1.27% for the third quarter in 2019. We are actively working on changing the mix of our funding profile and lowering our cost of deposits. As market rates approach zero, we anticipate our non-maturity deposit cost of funds will stabilize, however we do expect a further decrease in the cost of our certificate of deposit portfolio, said Bullard.

Noninterest income increased 16.4% to $4.8 million for the third quarter 2020 from $4.1 million for the second quarter 2020 and increased 149.7% compared to $1.9 million for the third quarter in 2019. Third quarter of 2020 included a $1.7 million gain on sale of loans compared to a $2.0 million gain on sale of loans in the preceding quarter and a $655,000 gain on sale of loans in the third quarter a year ago. Noninterest income growth during the third quarter of 2020 was driven by increased mortgage refinance activity, which resulted in strong loan sale activity, as well as a gain on sale of investment securities of $969,000. Loan and deposit service fees totaled $868,000 for the third quarter 2020, compared to $765,000 for the preceding quarter and $999,000 for the third quarter a year ago. For the first nine months of 2020, noninterest income increased 144.2% to $11.2 million, compared to $4.6 million in the first nine months of 2019, reflecting increases in gain on sale of investment securities, gain on sale of loans. Noninterest income also increased due to an increase in the cash surrender value of bank owned life insurance (BOLI) as a result of increased investment in BOLI, as well as a restructure of the existing BOLI policies into superior products.

Noninterest expense totaled $10.1 million for the third quarter of 2020, compared to $10.3 million for the preceding quarter and $8.4 million for the third quarter a year ago. The quarterly decrease is attributable to lower data processing expense and training expense which was partially offset by higher compensation expense, including salaries, commissions and benefits. For the first nine months of 2020, noninterest expense increased to $29.7 million, compared to $24.5 million in the first nine months of 2019, due to higher salary and benefit expenses, including employee commission payments, increased advertising spending and increases in operational expenses associated with overall asset growth.

Capital Ratios and Credit Quality

Capital levels for both the Company and its operating bank, First Federal, remain in excess of applicable regulatory requirements and the Bank was categorized as "well-capitalized" at September30, 2020. Common Equity Tier 1 and Total Risk-Based Capital Ratios at September 30, 2020 were 14.3% and 15.5%, respectively.

Nonperforming loans decreased to $3.1 million at September30, 2020, from $3.4 million at June30, 2020. The percentage of the allowance for loan losses to nonperforming loans increased to 419.9%, at September30, 2020, from 360.8% at June30, 2020, and 714.3% at September30, 2019. Classified loans decreased $1.1 million during the current quarter to $4.0 million at September30, 2020, reflecting improvement in commercial business loans. The allowance for loan losses as a percentage of total loans was 1.2% at September 30, 2020, compared to 1.2% at June30, 2020, and 1.1% at September 30, 2019. The ratio, excluding PPP loans was 1.25%.

About the Company

First Northwest is a bank holding company which primarily engages in the business activity of its subsidiary, First Federal. First Federal is a community-oriented financial institution serving Clallam, Jefferson, Kitsap, Whatcom, and King counties in Washington, through its Seattle lending center and ten full-service branches. Our business and operating strategy is focused on building sustainable earnings through hiring experienced bankers, geographic expansion, and diversifying our loan product mix, expanding our deposit product offerings that deliver value-added solutions, enhancing existing services and digital service delivery channels, and enhancing our infrastructure to support the changing needs and expectations of our customers.

Forward-Looking Statements

Certain matters discussed in this press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to, among other things, expectations of the business environment in which we operate, projections of future performance, perceived opportunities in the market, potential future credit experience, and statements regarding our mission and vision. These forward-looking statements are based upon current management expectations and may, therefore, involve risks and uncertainties. Our actual results, performance, or achievements may differ materially from those suggested, expressed, or implied by forward-looking statements as a result of a wide variety or range of factors including, but not limited to: increased competitive pressures; changes in the interest rate environment; the credit risks of lending activities; changes in general economic conditions and conditions within the securities markets; legislative and regulatory changes; and other factors described in the Companys latest Annual Report on Form 10-K and other filings with the Securities and Exchange Commission ("SEC")-which are available on our website at www.ourfirstfed.com and on the SECs website at www.sec.gov.

Any of the forward-looking statements that we make in this Press Release and in the other public statements we make may turn out to be incorrect because of the inaccurate assumptions we might make, because of the factors illustrated above or because of other factors that we cannot foresee. Because of these and other uncertainties, our actual future results may be materially different from those expressed or implied in any forward-looking statements made by or on our behalf and the Company's operating and stock price performance may be negatively affected. Therefore, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for 2020 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us and could negatively affect the Companys operations and stock price performance.

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

September June 30, September Three One Year 30, 2020 2020 30, 2019 Month Change ChangeAssets Cash and due $ 16,776 $ 16,346 $ 15,659 2.6 % 7.1 %from banksInterest-bearingdeposits in 35,303 33,242 40,822 6.2 (13.5 )banksInvestmentsecuritiesavailable for 369,111 364,273 251,196 1.3 46.9 sale, at fairvalueInvestmentsecurities held ? ? 37,649 n/a (100.0 )to maturity, atamortized costLoans held for 4,754 3,111 2,055 52.8 131.3 saleLoans receivable(net ofallowance forloan losses of 1,061,417 986,351 841,146 7.6 26.2 $13,007,$12,109, and$9,443)Federal HomeLoan Bank (FHLB) 5,944 6,074 4,931 (2.1 ) 20.5 stock, at costAccrued interest 7,367 5,360 3,726 37.4 97.7 receivablePremises and 14,737 14,188 14,443 3.9 2.0 equipment, netMortgageservicing 1,545 1,098 926 40.7 66.8 rights, netBank-owned life 38,104 37,482 29,754 1.7 28.1 insurance, netPrepaid expenses 9,612 11,334 8,003 (15.2 ) 20.1 and other assets Total assets $ 1,564,670 $ 1,478,859 $ 1,250,310 5.8 % 25.1 % Liabilities andShareholders' Equity Deposits $ 1,254,456 $ 1,170,325 $ 970,700 7.2 % 29.2 %Borrowings 109,150 112,379 85,324 -(2.9 ) 27.9 Accrued interest 51 253 262 (79.8 ) (80.5 )payableAccrued expensesand other 18,359 18,184 14,838 1.0 23.7 liabilitiesAdvances fromborrowers for 1,986 1,403 1,876 41.6 5.9 taxes andinsurance Total 1,384,002 1,302,544 1,073,000 6.3 29.0 liabilities Shareholders' EquityPreferred stock,$0.01 par value,authorized5,000,000 ? ? ? n/a n/a shares, noshares issued oroutstandingCommon stock,$0.01 par value,authorized75,000,000shares; issuedand outstanding10,234,204 atSeptember 30,2020; issued and 102 103 108 (1.0 ) (5.6 )outstanding10,326,226 atJune 30, 2020;and issued andoutstanding10,800,932 atSeptember 30,2019Additional 97,229 98,421 102,786 (1.2 ) (5.4 )paid-in capitalRetained 89,546 86,633 85,143 3.4 5.2 earningsAccumulatedother 3,186 717 (672 ) 344.4 574.1 comprehensiveloss, net of taxUnearnedemployee stock (9,395 ) (9,559 ) (10,055 ) 1.7 6.6 ownership plan(ESOP) shares Totalshareholders' 180,668 176,315 177,310 2.5 1.9 equity Totalliabilities and $ 1,564,670 $ 1,478,859 $ 1,250,310 5.8 % 25.1 %shareholders'equity

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

Quarter Ended September June 30, September Three One Year 30, 2020 2020 30, 2019 Month Change ChangeINTEREST INCOME Interest andfees on loans $ 11,097 $ 10,236 $ 10,096 8.4 % 9.9 %receivableInterest onmortgage-backed 565 740 1,087 (23.6 ) (48.0 )and relatedsecuritiesInterest oninvestment 1,603 1,316 921 21.8 74.0 securitiesInterest ondeposits in 9 8 65 12.5 (86.2 )banksFHLB dividends 97 55 92 76.4 5.4 Total interest 13,371 12,355 12,261 8.2 9.1 income INTEREST EXPENSEDeposits 1,405 2,041 2,141 (31.2 ) -(34.4 )Borrowings 205 201 691 2.0 -(70.3 )Total interest 1,610 2,242 2,832 (28.2 ) -(43.1 )expense Net interest 11,761 10,113 9,429 16.3 24.7 income PROVISION FOR 1,350 1,500 (170 ) (10.0 ) 894.1 LOAN LOSSES Net interestincome after 10,411 8,613 9,599 20.9 8.5 provision forloan losses NONINTEREST INCOMELoan anddeposit service 868 765 999 13.5 (13.1 )feesMortgageservicing fees, 148 (172 ) 44 186.0 236.4 net ofamortizationNet gain on 1,725 2,001 655 (13.8 ) 163.4 sale of loansNet gain onsale of 969 661 0 46.6 100.0 investmentsecuritiesIncrease incash surrendervalue of 622 627 147 (0.8 ) 323.1 bank-owned lifeinsuranceOther income 449 227 70 97.8 541.4 Totalnoninterest 4,781 4,109 1,915 16.4 149.7 income NONINTEREST EXPENSECompensation 6,070 5,966 4,771 1.7 27.2 and benefitsData processing 640 769 680 (16.8 ) (5.9 )Occupancy and 1,367 1,345 1,161 1.6 17.7 equipmentSupplies,postage, and 254 284 208 (10.6 ) 22.1 telephoneRegulatoryassessments and 262 223 209 17.5 25.4 state taxesAdvertising 285 377 197 (24.4 ) 44.7 Professional 361 354 278 2.0 29.9 feesFDIC insurance 86 70 (72 ) 22.9 219.4 premiumFHLB prepayment ? ? 344 n/a (100.0 )penaltyOther 756 894 648 (15.4 ) 16.7 Totalnoninterest 10,081 10,282 8,424 (2.0 ) 19.7 expense INCOME BEFOREPROVISION FOR 5,111 2,440 3,090 109.5 65.4 INCOME TAXES PROVISION FOR 1,436 464 580 209.5 147.6 INCOME TAXES NET INCOME $ 3,675 $ 1,976 $ 2,510 86.0 % 46.4 % Basic anddiluted $ 0.40 $ 0.21 $ 0.25 90.5 % 60.0 %earnings percommon share

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

Nine Months Ended Percent September 30, 2020 2019 Change INTEREST INCOME Interest and fees on loans $ 31,169 $ 30,661 1.7 %receivableInterest on mortgage-backed 2,264 3,536 (36.0 )and related securitiesInterest on investment 3,988 2,900 37.5 securitiesInterest on deposits in banks 85 190 (55.3 )FHLB dividends 199 268 (25.7 )Total interest income 37,705 37,555 0.4 INTEREST EXPENSE Deposits 5,584 6,133 (9.0 )Borrowings 840 2,717 (69.1 )Total interest expense 6,424 8,850 (27.4 ) Net interest income 31,281 28,705 9.0 PROVISION FOR LOAN LOSSES 4,116 420 880.0 Net interest income after 27,165 28,285 (4.0 )provision for loan losses NONINTEREST INCOME Loan and deposit service fees 2,514 2,899 (13.3 )Mortgage servicing fees, net (9 ) 143 (106.3 )of amortizationNet gain on sale of loans 4,109 830 395.1 Net gain on sale of investment 2,235 57 3,821.1 securitiesIncrease in cash surrendervalue of bank-owned life 1,577 435 262.5 insuranceOther income 782 225 247.6 Total noninterest income 11,208 4,589 144.2 NONINTEREST EXPENSE Compensation and benefits 17,397 14,097 23.4 Data processing 2,099 1,978 6.1 Occupancy and equipment 4,063 3,409 19.2 Supplies, postage, and 749 678 10.5 telephoneRegulatory assessments and 659 573 15.0 state taxesAdvertising 934 569 64.1 Professional fees 1,115 907 22.9 FDIC insurance premium 156 82 90.2 FHLB prepayment penalty 210 344 (39.0 )Other 2,363 1,859 27.1 Total noninterest expense 29,745 24,496 21.4 INCOME BEFORE PROVISION FOR 8,628 8,378 3.0 INCOME TAXES PROVISION FOR INCOME TAXES 2,104 1,582 33.0 NET INCOME $ 6,524 $ 6,796 (4.0 )% Basic and diluted earnings per $ 0.69 $ 0.68 1.5 %common share

FIRST NORTHWEST BANCORP AND SUBSIDIARYSelected Financial Ratios and Other Data(Unaudited)

As of or For the Quarter Ended September June 30, March 31, December September 30, 2020 2020 2020 31, 2019 30, 2019Performance ratios: (1)Return on 0.99 % 0.56 % 0.27 % 0.71 % 0.81 %average assetsReturn on 8.22 4.60 1.94 4.99 5.65 average equityAverage interest 3.22 2.90 2.86 2.86 2.93 rate spreadNet interest 3.36 3.10 3.11 3.14 3.23 margin (2)Efficiency ratio 60.9 72.3 80.0 74.4 74.3 (3)Averageinterest-earningassets to 130.9 129.5 130.1 131.8 130.5 averageinterest-bearingliabilitiesBook value per $ 17.65 $ 17.07 $ 16.02 $ 16.48 $ 16.42 common share Asset quality ratios:Nonperformingassets to total 0.2 % 0.2 % 0.2 % 0.2 % 0.1 %assets at end ofperiod (4)Nonperformingloans to total 0.3 0.3 0.2 0.2 0.2 loans (5)Allowance forloan losses to 419.9 360.8 622.4 536.1 714.3 nonperformingloans (5) Allowance forloan losses to 1.2 1.2 1.2 1.1 1.1 total loansNet charge-offsto average ? ? ? ? ? outstandingloans Capital ratios (First Federal):Tier 1 leverage 10.5 % 10.9 % 11.8 % 12.2 % 12.0 %Common equity 14.3 15.1 16.8 17.5 18.0 Tier 1 capital Tier 1 14.3 15.1 16.8 17.5 18.0 risk-basedTotal risk-based 15.5 16.4 18.1 18.7 19.1 Other Information:Average total $ 1,488,723 $ 1,401,500 $ 1,287,529 $ 1,242,780 $ 1,241,014 assetsAverageinterest-earning 1,401,090 1,305,437 1,208,314 1,167,805 1,167,353 assetsAverage total 1,009,210 938,646 876,135 849,741 867,647 loansAverage equity 178,887 172,009 179,614 177,759 177,671 Average deposits 1,227,656 1,133,665 1,008,410 985,788 957,736

(1 ) Performance ratios are annualized, where appropriate.(2 ) Net interest income divided by average interest-earning assets.(3 ) Total noninterest expense as a percentage of net interest income and total noninterest income. Nonperforming assets consists of nonperforming loans (which include(4 ) nonaccruing loans and accruing loans more than 90 days past due), real estate owned and repossessed assets.(5 ) Nonperforming loans consists of nonaccruing loans and accruing loans more than 90 days past due.

FIRST NORTHWEST BANCORP AND SUBSIDIARYSelected Financial Ratios and Other Data(Unaudited) (continued)

As of or For the Nine Months Ended September 30, 2020 2019 Performance ratios: (1) Return on average assets 0.62 % 0.72 %Return on average equity 4.92 5.18 Average interest rate spread 3.00 2.94 Net interest margin (2) 3.20 3.23 Efficiency ratio (3) 70.0 73.6 Average interest-earning assets to 130.2 129.1 average interest-bearing liabilitiesBook value per common share $ 17.65 $ 16.42 Asset quality ratios: Nonperforming assets to total assets at 0.2 % 0.1 %end of period (4)Nonperforming loans to total loans (5) 0.3 0.2 Allowance for loan losses to 419.9 714.3 nonperforming loans (5)Allowance for loan losses to total loans 1.2 1.1 Net charge-offs to average outstanding (0.1 ) 0.1 loans Capital ratios (First Federal): Tier 1 leverage 10.5 % 12.0 %Common equity Tier 1 capital 14.3 18.0 Tier 1 risk-based 14.3 18.0 Total risk-based 15.5 19.1 Other Information: Average total assets $ 1,393,036 $ 1,259,847 Average interest-earning assets 1,305,366 1,186,628 Average total loans 941,627 877,681 Average equity 176,844 174,852 Average deposits 1,123,606 948,146

(1 ) Performance ratios are annualized, where appropriate.(2 ) Net interest income divided by average interest-earning assets.(3 ) Total noninterest expense as a percentage of net interest income and total noninterest income. Nonperforming assets consists of nonperforming loans (which include(4 ) nonaccruing loans and accruing loans more than 90 days past due), real estate owned and repossessed assets.(5 ) Nonperforming loans consists of nonaccruing loans and accruing loans more than 90 days past due.

Contact:Matthew P. Deines, President and Chief Executive OfficerGeri Bullard, EVP and Chief Financial OfficerFirst Northwest Bancorp360-457-0461