First Northwest Bancorp

Previous wording

First Fed 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 ten full-service branches and five business centers, including our headquarters. We offer a wide range of products and services focused on the lending, deposit and money movement needs of the communities we serve. To diversify our portfolio and increase interest income, we increased our origination of commercial real estate, multi-family real estate, and commercial business loans. We also increased our auto and consumer loans through purchased auto loan programs and purchased manufactured homes. We continue to originate one-to-four family residential mortgage loans, primarily for sale into the secondary market to generate noninterest gain on sale and servicing fee revenue and manage interest rate risk or retain select loans in our portfolio to enhance interest income. Home equity, residential construction and commercial construction loans are also originated primarily in Western Washington. We offer traditional consumer and business deposit products, including transaction accounts, savings and money market accounts and certificates of deposit ("CDs" or "term certificates") 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. The Bank signed a redemption agreement in February 2026 which sets forth the path to unwind its investment in the Hero Fund, with capital distributions anticipated to commence in the third quarter of 2026.

Current wording

First Fed 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 eleven full-service branches and five business centers, including our headquarters. We offer a wide range of products and services focused on the lending, deposit and money movement needs of the communities we serve. To diversify our portfolio and increase interest income, we increased our origination of commercial real estate, multi-family real estate, and commercial business loans. We also increased our auto and consumer loans through purchased auto loan programs and purchased manufactured homes. We continue to originate one-to-four family residential mortgage loans, primarily for sale into the secondary market to generate noninterest gain on sale and servicing fee revenue and manage interest rate risk or retain select loans in our portfolio to enhance interest income. Home equity, residential construction and commercial construction loans are also originated primarily in Western Washington. We offer traditional consumer and business deposit products, including transaction accounts, savings and money market accounts and certificates of deposit ("CDs" or "term certificates") 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. The Bank signed a redemption agreement in February 2026 which sets forth the path to unwind its investment in the Hero Fund, with capital distributions beginning in the third quarter of 2026.

Previous wording

Assets*.* Total assets increased to $2.12 billion, or 0.8%, at June 30, 2026, from $2.11 billion at December 31, 2025.

Current wording

Assets*.* Total assets increased to $2.14 billion, or 1.6%, at September 30, 2026, from $2.11 billion at December 31, 2025.

Previous wording

Cash and cash equivalents increased by $13.2 million, or 15.6%, to $98.4 million as of June 30, 2026, compared to $85.1 million as of December 31, 2025.

Current wording

Cash and cash equivalents increased by $18.5 million, or 21.7%, to $103.6 million as of September 30, 2026, compared to $85.1 million as of December 31, 2025.

Previous wording

Investment securities increased $16.7 million, or 6.2%, to $287.0 million at June 30, 2026, from $270.3 million at December 31, 2025. Purchases totaling $38.9 million were partially offset by maturities totaling $13.1 million, regular principal payments totaling $8.4 million and a $649,000 increase in net unrealized losses during the six months ended June 30, 2026.

Current wording

Investment securities increased $39.9 million, or 14.8%, to $310.2 million at September 30, 2026, from $270.3 million at December 31, 2025. Purchases totaling $83.2 million were partially offset by maturities totaling $17.8 million, regular principal payments totaling $12.9 million and a $12.6 million increase in net unrealized losses during the nine months ended September 30, 2026.

Previous wording

The investment portfolio, including mortgage-backed securities, had an estimated projected average life of 6.4 years as of June 30, 2026 and 6.5 years as of December 31, 2025, and had an estimated average repricing term of 6.0 years as of June 30, 2026, compared to 6.7 years as of December 31, 2025, based on the interest rate environment at those times. The effective duration of the investment portfolio was 4.6 years at June 30, 2026, compared to 4.6 years at December 31, 2025. The investment portfolio was comprised of 51.0% in amortizing securities at June 30, 2026, compared to 54.2% at December 31, 2025. 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 anticipate the investment portfolio will continue to provide supplemental interest income and act as a source of liquidity. For additional information, see Note 2 of the Notes to Consolidated Financial Statements contained in Item 1 of this Form 10-Q.

Current wording

The investment portfolio, including mortgage-backed securities, had an estimated projected average life of 6.9 years as of September 30, 2026 and 6.5 years as of December 31, 2025, and had an estimated average repricing term of 6.6 years as of September 30, 2026, compared to 6.7 years as of December 31, 2025, based on the interest rate environment at those times. The effective duration of the investment portfolio was 4.2 years at September 30, 2026, compared to 4.6 years at December 31, 2025. The investment portfolio was comprised of 54.1% in amortizing securities at September 30, 2026, compared to 54.2% at December 31, 2025. 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 anticipate the investment portfolio will continue to provide supplemental interest income and act as a source of liquidity. For additional information, see Note 2 of the Notes to Consolidated Financial Statements contained in Item 1 of this Form 10-Q.

Previous wording

Net loans, excluding loans held for sale, decreased $15.0 million, or 0.9%, to $1.60 billion at June 30, 2026, from $1.61 billion at December 31, 2025. During the six months ended June 30, 2026, one-to-four family loans decreased $19.7 million during the six months ended June 30, 2026, as repayment activity exceeded $1.8 million in residential construction loans that converted to permanent amortizing loans and new loan originations totaling $3.2 million. Multi-family loans decreased $32.7 million during the six months ended June 30, 2026, as prepayments and scheduled payments exceeded $3.7 million of new loan originations and $199,000 of construction loans converting into permanent amortizing loans. Commercial real estate loans decreased $115,000 during the six months ended June 30, 2026, with repayment activity exceeding $13.2 million of new loan originations and $8.6 million of construction loan conversions. Construction and land loans increased $429,000, or 0.7%, to $61.7 million at June 30, 2026, from $61.3 million at December 31, 2025, with draws on new and existing loan commitments totaling $25.5 million, partially offset by payment activity totaling $15.0 million, $10.4 million converting into fully amortizing loans and charge-offs totaling $371,000.

Current wording

Net loans, excluding loans held for sale, decreased $34.8 million, or 2.2%, to $1.58 billion at September 30, 2026, from $1.61 billion at December 31, 2025. During the nine months ended September 30, 2026, one-to-four family loans decreased $23.1 million during the nine months ended September 30, 2026, as repayment activity exceeded $2.6 million in residential construction loans that converted to permanent amortizing loans and new loan originations totaling $8.5 million. Multi-family loans decreased $43.3 million during the nine months ended September 30, 2026, as prepayments and scheduled payments exceeded $5.6 million of new loan originations and $183,000 of construction loans converting into permanent amortizing loans. Commercial real estate loans increased $17.5 million during the nine months ended September 30, 2026, with $34.9 million of new loan originations and $9.9 million of construction loan conversions exceeding repayment activity. Construction and land loans increased $1.2 million, or 2.0%, to $62.5 million at September 30, 2026, from $61.3 million at December 31, 2025, with draws on new and existing loan commitments totaling $33.5 million, partially offset by payment activity totaling $20.7 million, $11.2 million converting into fully amortizing loans and charge-offs totaling $481,000.

Previous wording

Home equity loan outstanding balances increased $4.9 million over the prior year end due to $16.4 million of net draws on new and existing line of credit commitments and $1.9 million of home equity loan originations, partially offset by prepayments and scheduled payments. Auto and other consumer loans increased $11.5 million with auto loan purchases of $41.0 million and individual manufactured home loan purchases of $4.3 million, partially offset by prepayments and scheduled payments.

Current wording

Home equity loan outstanding balances increased $9.1 million over the prior year end due to $22.8 million of net draws on new and existing line of credit commitments and $2.9 million of home equity loan originations, partially offset by prepayments and scheduled payments. Auto and other consumer loans increased $12.7 million with auto loan purchases of $57.5 million and individual manufactured home loan purchases of $8.4 million, partially offset by prepayments and scheduled payments.

Previous wording

Commercial business loans increased $20.7 million, including a $25.7 million increase to our Northpointe Bank Mortgage Purchase Program ("Northpointe MPP") participation, $12.4 million of organic originations and $3.5 million of draws on existing line of credit commitments, partially offset by charge-offs totaling $719,000 and other repayment activity.

Current wording

Commercial business loans decreased $8.3 million, including a $20.0 million decrease to our Northpointe Bank Mortgage Purchase Program ("Northpointe MPP") participation, charge-offs totaling $440,000 and other repayment activity, partially offset by $18.6 million of organic originations and $2.8 million of draws on existing line of credit commitments.

Previous wording

During the six months ended June 30, 2026, the Company added $79.8 million of organic loan originations, of which $41.9 million, or 52.6%, were located in the Puget Sound region, $31.7 million, or 39.7%, on the North Olympic Peninsula, and $4.1 million, or 5.2%, in other areas throughout Washington State. The Company purchased $41.0 million in auto loans and $4.4 million in manufactured home loans to borrowers located throughout the United States during the six months ended June 30, 2026. The total loan portfolio was composed of 76.9% organic originations and 23.1% purchased loans at June 30, 2026. 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.

Current wording

During the nine months ended September 30, 2026, the Company added $142.0 million of organic loan originations, of which $80.4 million, or 56.6%, were located in the Puget Sound region, $51.0 million, or 35.9%, on the North Olympic Peninsula, and $6.3 million, or 4.4%, in other areas throughout Washington State. The Company purchased $57.5 million in auto loans and $8.4 million in manufactured home loans to borrowers located throughout the United States during the nine months ended September 30, 2026. The total loan portfolio was composed of 77.5% organic originations and 22.5% purchased loans at September 30, 2026. We will continue to evaluate lending strategies across our product lines and markets, including opportunities to supplement organic growth through wholesale acquisitions, with the objective of enhancing earnings while prudently managing credit risk.

Previous wording

The ACLL decreased to $16.3 million at June 30, 2026, compared to $17.0 million at December 31, 2025. A $703,000 reduction in the pooled loan reserve balance was driven by lower one-to-four family, multi-family and commercial business loan balances combined with lower loss factors applied to one-to-four family, commercial real estate, other consumer and commercial business loans. The decrease to the pooled loan reserve balance was partially offset by higher purchased auto balances and higher loss factors applied to construction and home equity loan balances at the end of the current quarter. The pooled loan reserve was impacted by a mild increase in gross domestic product, higher unemployment forecasts, net loan charge-offs and a reduction in nonaccrual loans. The reserve on individually analyzed loans increased $22,000 due to a commercial business loan new to the category with a reserve at period end. The ACLL as a percentage of total loans was 1.01% and 1.04% at June 30, 2026 and December 31, 2025, 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 June 30, 2026.

Current wording

The ACLL decreased to $16.4 million at September 30, 2026, compared to $17.0 million at December 31, 2025. An $884,000 reduction in the pooled loan reserve balance was driven by lower commercial business, multi-family and one-to-four family loan balances combined with lower loss factors applied to multi-family, commercial real estate and other consumer loans. The decrease to the pooled loan reserve balance was partially offset by higher loss factors applied to construction and commercial business loan balances at the end of the current quarter. The pooled loan reserve loss factors were impacted by improved unemployment forecasts partially offset by weakened domestic product projections. Net loan charge offs and a reduction in nonaccrual loans further impacted the allowance. The reserve on individually analyzed loans increased $286,000 due to a commercial business loan new to the category with a reserve at period end. The ACLL as a percentage of total loans was 1.03% and 1.04% at September 30, 2026 and December 31, 2025, respectively. Management continues to monitor economic conditions for potential weaknesses that could expose the loan portfolio to losses. We believe the ACLL is adequate to cover current expected credit losses in the loan portfolio as of September 30, 2026.

Previous wording

Nonperforming loans decreased $1.9 million, or 8.3%, to $20.7 million at June 30, 2026, from $22.6 million at December 31, 2025. Current year activity included principal payments totaling $2.3 million and payoffs totaling $776,000 and net recoveries on nonperforming loans totaling $289,000. The decreases were partially offset by the transition into nonaccrual status of two residential mortgages, two auto loans, a commercial business loan, a home equity loan and six other consumer loans totaling $1.5 million. Nonperforming loans to total loans was 1.3% at June 30, 2026, compared to 1.4% at December 31, 2025. The ACLL as a percentage of nonaccrual loans increased to 78.7% at June 30, 2026, up from 75.2% at December 31, 2025.

Current wording

Nonperforming loans decreased $2.7 million, or 12.0%, to $19.9 million at September 30, 2026, from $22.6 million at December 31, 2025. Current year activity included principal payments totaling $3.9 million and payoffs totaling $776,000 and net recoveries on nonperforming loans totaling $475,000. The decreases were partially offset by the transition into nonaccrual status of two residential mortgages, three auto loans, two commercial business loans, a home equity loan, a multi-family participation and seven other consumer loans totaling $2.5 million. Nonperforming loans to total loans was 1.2% at September 30, 2026, compared to 1.4% at December 31, 2025. The ACLL as a percentage of nonaccrual loans increased to 82.4% at September 30, 2026, up from 75.2% at December 31, 2025.

Previous wording

Classified loans decreased $9.8 million, or 27.7%, to $25.5 million at June 30, 2026, from $35.3 million at December 31, 2025, primarily due to payoffs totaling $14.9 million, principal payments totaling $1.5 million, net recoveries on previously charged-off loans totaling $285,000 and upgrades totaling $156,000. The decreases were partially offset by downgrades across multiple loan categories totaling $6.9 million. Four collateral-dependent loans totaling $18.3 million account for 72% of the classified loan balance at June 30, 2026. The Bank continues to work with all borrowers to facilitate satisfactory repayment.

Current wording

Classified loans decreased $9.2 million, or 26.1%, to $26.1 million at September 30, 2026, from $35.3 million at December 31, 2025, primarily due to payoffs totaling $14.9 million, principal payments totaling $1.5 million, net recoveries on previously charged-off loans totaling $285,000 and upgrades totaling $156,000. The decreases were partially offset by downgrades across multiple loan categories totaling $6.9 million. Four collateral-dependent loans totaling $18.3 million account for 72% of the classified loan balance at September 30, 2026. The Bank continues to work with all borrowers to facilitate satisfactory repayment.

Previous wording

In the first half of 2026, the Bank recorded net recoveries of $288,000 in commercial business loans. Net charge-offs of $242,000 to auto and other consumer loans, $371,000 to a commercial construction loan and $3,000 to commercial real estate loans partially offset the recoveries. Charge-offs are based on individual loan evaluations and do not represent a universal decline in the collectability of all loans in these categories.

Current wording

The Bank recorded net charge-offs of $481,000 to a commercial construction loan, $323,000 to auto and other consumer loans and $3,000 to commercial real estate loans for the nine months ended September 30, 2026. Net recoveries of $25,000 in commercial business loans partially offset the net charge-offs. Charge-offs are based on individual loan evaluations and do not represent a universal decline in the collectability of all loans in these categories.

Previous wording

Liabilities. Total liabilities increased to $1.97 billion at June 30, 2026, from $1.95 billion at December 31, 2025, due to increases in deposits of $8.3 million and borrowings of $5.0 million.

Current wording

Liabilities. Total liabilities increased to $1.99 billion at September 30, 2026, from $1.95 billion at December 31, 2025, due to increases in deposits of $35.3 million and borrowings of $3.6 million.

Previous wording

Deposit account balances increased $8.3 million, or 0.5%, to $1.61 billion at June 30, 2026 from $1.60 billion at December 31, 2025. During the first six months of 2026, total customer deposit balances increased $36.2 million and brokered deposit balances decreased $27.9 million. All categories of customer deposits reflect increases, including customer CDs of $19.9 million, money market accounts of $11.1 million, demand deposit accounts of $2.8 million and savings accounts of $2.5 million. The Bank utilizes 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. Competition for deposits across the industry continues to pose deposit retention challenges. Our focus continues to be on increasing core customer deposits, with an emphasis on small-to-medium sized business deposits, and maintaining a stable source of funding to reduce interest expense as a percentage of liabilities.

Current wording

Deposit account balances increased $35.3 million, or 2.2%, to $1.63 billion at September 30, 2026 from $1.60 billion at December 31, 2025. During the first nine months of 2026, total customer deposit balances increased $63.2 million and brokered deposit balances decreased $27.9 million. All categories of customer deposits reflect increases, including customer CDs of $31.5 million, money market accounts of $15.6 million, demand deposit accounts of $11.4 million and savings accounts of $4.7 million. The Bank utilizes 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. Competition for deposits across the industry continues to pose deposit retention challenges. Our focus continues to be on increasing core customer deposits, with an emphasis on small-to-medium sized business deposits, and maintaining a stable source of funding to reduce interest expense as a percentage of liabilities.

Previous wording

FHLB advances increased $5.0 million, or 1.9% to $265.0 million at June 30, 2026, from $260.0 million at December 31, 2025. The short-term FHLB advances supported increased on balance sheet liquidity.

Current wording

FHLB advances increased $3.5 million, or 1.3% to $263.5 million at September 30, 2026, from $260.0 million at December 31, 2025, with a change in the borrowing mix from long-term fixed-rate to short-term variable-rate advances. The use of short-term FHLB advances supported increased on balance sheet liquidity.

Previous wording

Equity***.*** Total shareholders' equity increased $1.1 million to $158.3 million for the six months ended June 30, 2026, due to an increase in the after-tax fair market values of the available-for-sale investment securities portfolio of $590,000, the allocation of compensation-related shares valued at $512,00 and net income of $314,000, partially offset by a $428,000 increase in the investment portfolio hedge post-tax fair market value. During the first six months of 2026, 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.

Current wording

Equity***.*** Total shareholders' equity decreased $8.4 million to $148.8 million for the nine months ended September 30, 2026, due to a decrease in the after-tax fair market values of the available-for-sale investment securities portfolio of $9.8 million and a net loss of $429,000, partially offset by a $921,000 increase in the investment portfolio hedge post-tax fair market value and the allocation of compensation-related shares valued at $766,000. During the first nine months of 2026, 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.

Previous wording

**General.**The Company recorded net income of $314,000 for the six months ended June 30, 2026, compared to a net loss of $5.4 million for the six months ended June 30, 2025. A $7.9 million decrease in provision for credit losses, and a $573,000 increase in net interest income were partially offset by a $1.9 million decrease in noninterest income, a $525,000 decrease in income tax benefit and a $312,000 increase in noninterest expense.

Current wording

**General.**The Company recorded a net loss of $743,000 for the three months ended September 30, 2026, compared to net income of $802,000 for the three months ended September 30, 2025. A $1.4 million increase in provision for credit losses, a $251,000 decrease in net interest income and a $129,000 decrease in income tax benefit were partially offset by a $172,000 increase in noninterest income and a $75,000 decrease in noninterest expense.

Previous wording

**Net Interest Income.**Net interest income was flat at $14.2 million for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, with declines in loan, investment and interest-earning deposit income offset by reduced deposit and borrowing costs. The net interest margin increased 12 basis points to 2.95% for the three months ended June 30, 2026, compared to 2.83% for the same period in 2025.

Current wording

**Net Interest Income.**Net interest income decreased $251,000, or 1.7%, to $14.3 million for the three months ended September 30, 2026, compared to $14.6 million for the three months ended September 30, 2025, with declines in loan, investment and interest-earning deposit income offset by reduced deposit and borrowing costs. The net interest margin increased 5 basis points to 2.96% for the three months ended September 30, 2026, compared to 2.91% for the same period in 2025.

Previous wording

**Interest Income.**Total interest income decreased $1.7 million, or 6.2%, to $25.5 million for the three months ended June 30, 2026, from $27.1 million for the comparable period in 2025. Average earning assets decreased $85.2 million year-over-year. The yield on average interest-earning assets decreased 11 basis points to 5.30% for the three months ended June 30, 2026, compared to 5.41% for the same period in the prior year. Interest and fees on loans receivable decreased $817,000 primarily due to a decrease in the average balance of net loans receivable of $50.9 million, a change in the mix of loans compared to the prior year and a 3 basis point decrease in average loan yields. Interest from investment securities decreased $743,000 primarily due to the maturity of some higher-yielding investment securities during 2025 resulting in a 51 basis point decrease in average investment yields. While the Company's yields dropped period-over-period, the decrease was significantly lower than the 75 basis point Fed Funds decrease over the same period.

Current wording

**Interest Income.**Total interest income decreased $1.3 million, or 4.9%, to $25.6 million for the three months ended September 30, 2026, from $26.9 million for the comparable period in 2025. Average earning assets decreased $73.4 million year-over-year. The yield on average interest-earning assets decreased 7 basis points to 5.30% for the three months ended September 30, 2026, compared to 5.37% for the same period in the prior year. Interest and fees on loans receivable decreased $1.0 million primarily due to a decrease in the average balance of net loans receivable of $70.7 million, a change in the mix of loans compared to the prior year. Interest from investment securities decreased $177,000 primarily due to the maturity of some higher-yielding investment securities during 2025 resulting in a 25 basis point decrease in average investment yields. While the Company's yields dropped period-over-period, the overall decrease was significantly lower than the 25 basis point Fed Funds decrease over the same period.

Previous wording

Interest Expense. Total interest expense decreased $1.7 million, or 12.8%, to $11.3 million for the three months ended June 30, 2026, compared to $12.9 million for the three months ended June 30, 2025. The average cost of interest-bearing liabilities decreased 23 basis points to 2.78% for the three months ended June 30, 2026, compared to 3.01% for the same period last year. Interest expense on deposits decreased $1.5 million due to a $77.3 million decrease in the average balance and a 31 basis point decrease in the cost of interest-bearing deposits reflecting a decreased reliance on brokered deposits. Interest expense on borrowings decreased $137,000 due to a $22.9 million decrease in the average balance of FHLB advances offset by a 16 basis point increase in the cost of borrowings due to the subordinated debt transition from a fixed to floating rate compared to the same period in 2025.

Current wording

Interest Expense. Total interest expense decreased $1.1 million, or 8.7%, to $11.3 million for the three months ended September 30, 2026, compared to $12.3 million for the three months ended September 30, 2025. The average cost of interest-bearing liabilities decreased 13 basis points to 2.78% for the three months ended September 30, 2026, compared to 2.91% for the same period last year. Interest expense on deposits decreased $590,000 due to a $15.6 million decrease in the average balance and a 14 basis point decrease in the cost of interest-bearing deposits reflecting a decreased reliance on brokered deposits. Interest expense on borrowings decreased $480,000 due to a $61.1 million decrease in the average balance of FHLB advances offset by a 30 basis point increase in the cost of borrowings due to the transition of the subordinated debt from a fixed to floating rate compared to the same period in 2025.

Previous wording

During the three months ended June 30, 2026, interest expense on brokered CDs decreased due to lower average balances of $72.6 million along with a 13 basis point decrease in the average rate paid, compared to the three months ended June 30, 2025. Customer CDs represented 28.20% and 27.20% of total deposits at June 30, 2026 and 2025, respectively. Brokered CDs represented 3.60% and 6.50% of total deposits at June 30, 2026 and 2025, respectively.

Current wording

During the three months ended September 30, 2026, interest expense on brokered CDs decreased due to lower average balances of $45.2 million along with a 26 basis point decrease in the average rate paid, compared to the three months ended September 30, 2025. Customer CDs represented 28.40% and 26.50% of total deposits at September 30, 2026 and 2025, respectively. Brokered CDs represented 3.60% and 6.30% of total deposits at September 30, 2026 and 2025, respectively.

Previous wording

Provision for Credit Losses. The Company recorded a $337,000 loan loss provision recapture and a $203,000 unfunded commitment provision recapture for the three months ended June 30, 2026. This compares to a $296,000 loan loss provision recapture and a $64,000 unfunded commitment provision recapture for the three months ended June 30, 2025. The current period recapture of provision for credit losses on loans reflects lower pooled reserve loan balances, a decrease in the reserve on individually evaluated loans, changes in the loan portfolio composition and lower loss factors at June 30, 2026, partially offset by net charge-offs totaling $177,000 for the three-month period. The higher unfunded commitment provision recapture compared to the same period in 2025 was primarily due to lower qualitative loss factors.

Current wording

Provision for Credit Losses. The Company recorded a $532,000 loan loss provision and a $207,000 unfunded commitment provision for the three months ended September 30, 2026. This compares to a $620,000 loan loss provision recapture and a $53,000 unfunded commitment provision recapture for the three months ended September 30, 2025. The current period provision for credit losses on loans reflects net charge-offs totaling $453,000, an increase in the reserve on individually evaluated loans, changes in the loan portfolio composition and higher loss factors at September 30, 2026, partially offset by lower pooled reserve loan balances for the three-month period. The higher unfunded commitment provision compared to the same period in 2025 was due to a combination of increased balances and higher qualitative loss factors.

Previous wording

Provision for Income Tax. An income tax provision of $17,000 was recorded for the three months ended June 30, 2026, compared to a provision of $297,000 for the three months ended June 30, 2025, due to a period-over-period decrease in net income before taxes of $3.6 million. The provision includes accruals for both federal and state income taxes. For additional information, see Note 7 of the Notes to Consolidated Financial Statements contained in Item 1 of this Form 10-Q.

Current wording

Provision for Income Tax. An income tax benefit of $819,000 was recorded for the three months ended September 30, 2026, compared to a benefit of $948,000 for the three months ended September 30, 2025, reflecting a lower estimated tax loss compared to the same period in 2025. The provision includes accruals for both federal and state income taxes. For additional information, see Note 7 of the Notes to Consolidated Financial Statements contained in Item 1 of this Form 10-Q.

Previous wording

Comparison of Results of Operations for the Six Months Ended June 30, 2026 and 2025

Current wording

Comparison of Results of Operations for the Nine Months Ended September 30, 2026 and 2025

Previous wording

**General.**The Company recorded net income of $308,000 for the three months ended June 30, 2026, compared to net income of $3.7 million for the three months ended June 30, 2025. A $3.6 million increase in noninterest expense, a $165,000 decrease in noninterest income and a $20,000 decrease in net interest income were partially offset by a $180,000 increase in recapture of provision for credit losses and a $280,000 decrease in income tax provision.

Current wording

**General.**The Company recorded a net loss of $429,000 for the nine months ended September 30, 2026, compared to a net loss of $4.6 million for the nine months ended September 30, 2025. A $6.5 million decrease in provision for credit losses and a $322,000 increase in net interest income were partially offset by a $1.8 million decrease in noninterest income, a $4.8 million decrease in income tax benefit and a $237,000 increase in noninterest expense.

Previous wording

**Net Interest Income.**Net interest income increased $573,000 to $28.6 million for the six months ended June 30, 2026, from $28.0 million for the six months ended June 30, 2025, as reduced deposit and borrowing costs outpaced declines in loan, investment and interest-earning deposit income. The net interest margin increased by 19 basis points to 2.99% for the six months ended June 30, 2026, compared to 2.80% for the same period in 2025.

Current wording

**Net Interest Income.**Net interest income increased $322,000 to $42.9 million for the nine months ended September 30, 2026, from $42.6 million for the nine months ended September 30, 2025, as reduced deposit and borrowing costs outpaced declines in loan, investment and interest-earning deposit income. The net interest margin increased by 15 basis points to 2.98% for the nine months ended September 30, 2026, compared to 2.83% for the same period in 2025.

Previous wording

**Interest Income.**Total interest income decreased $3.2 million, or 5.9%, to $50.8 million for the six months ended June 30, 2026, from $54.0 million for the comparable period in 2025. Average earning assets decreased $93.3 million year-over-year. The yield on average interest-earning assets decreased 7 basis points to 5.31% for the six months ended June 30, 2026, compared to 5.38% for the same period in the prior year. Interest from investment securities decreased $2.0 million primarily due to the maturity of some higher-yielding investment securities during 2025. Interest and fees on loans receivable decreased $1.1 million, to $44.0 million for the six months ended June 30, 2026, from $45.1 million for the six months ended June 30, 2025, primarily due to a decrease in the average balance of net loans receivable of $47.8 million and a change in the mix of loans compared to the prior year, partially offset by an increase in average loan yields to 5.57% for the six months ended June 30, 2026, from 5.54% for the same period in 2025. For context, the Fed Funds rate decreased 75 basis points over the same period.

Current wording

**Interest Income.**Total interest income decreased $4.5 million, or 5.5%, to $76.4 million for the nine months ended September 30, 2026, from $80.9 million for the comparable period in 2025. Average earning assets decreased $86.6 million year-over-year. The yield on average interest-earning assets decreased 7 basis points to 5.31% for the nine months ended September 30, 2026, compared to 5.38% for the same period in the prior year. Interest from investment securities decreased $2.1 million primarily due to the maturity of some higher-yielding investment securities during 2025. Interest and fees on loans receivable decreased $2.1 million, to $65.8 million for the nine months ended September 30, 2026, from $67.9 million for the nine months ended September 30, 2025, primarily due to a decrease in the average balance of net loans receivable of $55.5 million and a change in the mix of loans compared to the prior year, partially offset by an increase in average loan yields to 5.56% for the nine months ended September 30, 2026, from 5.54% for the same period in 2025. For context, the Fed Funds rate was 75 basis lower during most of 2026 compared to the same period in 2025.

Previous wording

Interest Expense. Total interest expense decreased $3.7 million, or 14.4%, to $22.2 million for the six months ended June 30, 2026, compared to $25.9 million for the six months ended June 30, 2025. The average cost of interest-bearing liabilities decreased 28 basis points to 2.75% for the six months ended June 30, 2026, compared to 3.03% for the same period last year. Interest expense on deposits decreased $3.3 million due to a $71.2 million decrease in the average balance and a 36 basis point decrease in the cost of interest-bearing deposits. A reduced reliance on brokered CDs and a shift in the deposit mix from interest-bearing demand and customer CDs to higher average balances of money market and savings accounts resulted in a lower cost of deposits. Interest expense on borrowings decreased $412,000 due to a $24.8 million decrease in the average balance of FHLB advances offset by a 10 basis point increase in the cost of borrowings due to the subordinated debt transition from a fixed to floating rate compared to the same period in 2025.

Current wording

Interest Expense. Total interest expense decreased $4.8 million, or 12.6%, to $33.5 million for the nine months ended September 30, 2026, compared to $38.3 million for the nine months ended September 30, 2025. The average cost of interest-bearing liabilities decreased 23 basis points to 2.76% for the nine months ended September 30, 2026, compared to 2.99% for the same period last year. Interest expense on deposits decreased $3.9 million due to a $51.9 million decrease in the average balance and a 28 basis point decrease in the cost of interest-bearing deposits. A reduced reliance on brokered CDs and lower rates paid on customer deposits resulted in a lower cost of deposits. Interest expense on borrowings decreased $892,000 due to a $37.1 million decrease in the average balance of FHLB advances offset by a 17 basis point increase in the cost of borrowings due to the subordinated debt transition from a fixed to floating rate compared to the same period in 2025.

Previous wording

During the six months ended June 30, 2026, interest expense on brokered CDs decreased due to lower average balances of $80.3 million along with a 25 basis point decrease in the average rate paid, compared to the six months ended June 30, 2025. Average deposit account balances were composed of 84.9% in interest-bearing deposits and 15.1% in noninterest-bearing deposits at June 30, 2026, compared to 85.3% and 14.7%, respectively, at June 30, 2025. Customer CDs represented 29.3% and 29.1% of customer deposits at June 30, 2026 and 2025, respectively.

Current wording

During the nine months ended September 30, 2026, interest expense on brokered CDs decreased due to lower average balances of $68.5 million along with a 27 basis point decrease in the average rate paid, compared to the nine months ended September 30, 2025. Average deposit account balances were composed of 84.8% in interest-bearing deposits and 15.2% in noninterest-bearing deposits at September 30, 2026, compared to 85.1% and 14.9%, respectively, at September 30, 2025. Customer CDs represented 29.5% and 28.3% of customer deposits at September 30, 2026 and 2025, respectively.

Previous wording

Provision for Credit Losses. The Company recorded a $350,000 loan loss provision recapture and a $112,000 unfunded commitment provision recapture for the six months ended June 30, 2026. This compares to a $7.5 million loan loss provision and a $49,000 unfunded commitment provision recapture for the six months ended June 30, 2025. The current period recapture of provision for credit losses on loans reflects lower pooled reserve loan balances and reduced loss factors, partially offset by an increase in the reserve on individually evaluated loans. Net charge-offs recorded during the first half of 2026 totaled $328,000, compared to $9.6 million recorded during the first half of 2025. The higher provision recapture on unfunded commitments compared to the same period in 2025 was primarily due to lower qualitative loss factors.

Current wording

Provision for Credit Losses. The Company recorded a $182,000 loan loss provision and a $95,000 unfunded commitment provision for the nine months ended September 30, 2026. This compares to a $6.9 million loan loss provision and a $102,000 unfunded commitment provision recapture for the nine months ended September 30, 2025. The current period provision for credit losses on loans reflects an increase in the reserve on individually evaluated loans and higher pooled loan loss factors, partially offset by lower pooled reserve loan balances. Net charge-offs recorded during the nine months ended September 30, 2026, totaled $781,000, compared to $11.1 million recorded during the nine months ended September 30, 2025. The higher provision on unfunded commitments compared to the same period in 2025 was due to combination of increased commitment balances and higher loss factors.

Previous wording

**Noninterest Income.**Noninterest income decreased $1.9 million, or 32.5%, to $4.0 million for the six months ended June 30, 2026, from $6.0 million for the six months ended June 30, 2025. Nonrecurring income for the first half of 2025 included a $1.1 million BOLI death benefit, an $846,000 gain on the extinguishment of debt related to repurchasing $5.0 million of subordinated debt at a discount recorded in other income and $81,000 of interest related to an Employee Retention Credit recorded in other income. Also included in other income was a period-over-period decrease in swap fee income of $113,000.

Current wording

**Noninterest Income.**Noninterest income decreased $1.8 million, or 22.2%, to $6.2 million for the nine months ended September 30, 2026, from $8.0 million for the nine months ended September 30, 2025. The decrease was primarily due to nonrecurring income for the first nine months of 2025 including a $1.1 million BOLI death benefit, an $846,000 gain on the extinguishment of debt related to repurchasing $5.0 million of subordinated debt at a discount recorded in other income and $81,000 of interest related to an Employee Retention Credit recorded in other income. Also included in other income was a period-over-period decrease in swap fee income of $226,000.

Previous wording

**Noninterest Expense.**Noninterest expense increased $312,000, or 1.0%, to $33.1 million for the six months ended June 30, 2026, compared to $32.8 million for the six months ended June 30, 2025. Nonrecurring expenses for the first half of 2025 included a $5.8 million legal settlement paid and a $2.6 million Employee Retention Credit reduction to compensation expense. Other increases to compensation and benefits included period-over-period increases to incentive payments of $616,000 and medical insurance of $354,000. Legal expense included in professional fees increased $1.5 million period-over-period as the Company continues to defend against the claims detailed in Note 15 contained in Item 1 of this Form 10-Q. Consulting costs included in professional fees increased $651,000 compared to the same period in 2025 as the Bank utilized outside resources to assist with key duties of certain open positions during the first quarter of 2026 and initiated a process improvement project in the second quarter of 2026.

Current wording

**Noninterest Expense.**Noninterest expense increased $237,000, or 0.5%, to $50.4 million for the nine months ended September 30, 2026, compared to $50.2 million for the nine months ended September 30, 2025. Nonrecurring expenses for the first nine months of 2025 included a $5.7 million legal settlement paid and a $2.6 million Employee Retention Credit reduction to compensation expense. Nonrecurring expenses for the first nine months of 2026 included a $1.3 million legal settlement accrual. Other changes to compensation and benefits included period-over-period increases to medical insurance of $450,000, regular compensation of $356,000 and incentives of $243,000. Legal expense included in professional fees increased $638,000 period-over-period as the Company continued to defend against the claims detailed in Note 15 contained in Item 1 of this Form 10-Q. Consulting costs included in professional fees increased $723,000 compared to the same period in 2025 as the Bank utilized outside resources to assist with key duties of certain open positions during the first quarter of 2026 and initiated a process improvement project in the second quarter of 2026.

Previous wording

Provision for Income Tax. An income tax benefit of $303,000 was recorded for the six months ended June 30, 2026, compared to a benefit of $828,000 for the six months ended June 30, 2025, due to a period-over-period decrease in net income before taxes of $6.2 million, partially offset by a tax penalty estimate for the early surrender of BOLI contracts recorded in 2025. The provision includes accruals for both federal and state income taxes. For additional information, see Note 7 of the Notes to Consolidated Financial Statements contained in Item 1 of this Form 10-Q.

Current wording

Provision for Income Tax. An income tax benefit of $1.1 million was recorded for the nine months ended September 30, 2026, compared to a benefit of $1.8 million for the nine months ended September 30, 2025, due to a period-over-period decrease in net loss before taxes of $4.8 million, partially offset by a tax penalty estimate for the early surrender of BOLI contracts recorded in 2025. The provision includes accruals for both federal and state income taxes. For additional information, see Note 7 of the Notes to Consolidated Financial Statements contained in Item 1 of this Form 10-Q.

Previous wording

(2) Interest earned on loans receivable includes net deferred costs of $775,000 and $148,000 for the three months ended June 30, 2026 and 2025, respectively.

Current wording

(2) Interest earned on loans receivable includes net deferred costs of $841,000 and $410,000 for the three months ended September 30, 2026 and 2025, respectively.

Previous wording

(4) Cost of all deposits, including noninterest-bearing demand deposits, was 2.04% and 2.31% for the three months ended June 30, 2026 and 2025, respectively.

Current wording

(4) Cost of all deposits, including noninterest-bearing demand deposits, was 2.08% and 2.20% for the three months ended September 30, 2026 and 2025, respectively.

Previous wording

(1) The average loans receivable, net balances include nonaccrual loans. (2) Interest earned on loans receivable includes net deferred costs of $1.4 million and $486,000 for the six months ended June 30, 2026 and 2025, respectively. (3) Includes interest-earning deposits (cash) at other financial institutions. (4) Cost of all deposits, including noninterest-bearing demand deposits, was 2.04% and 2.35% for the six months ended June 30, 2026 and 2025, respectively. (5) Net interest income divided by average interest-earning assets.

Current wording

(1) The average loans receivable, net balances include nonaccrual loans. (2) Interest earned on loans receivable includes net deferred costs of $2.3 million and $896,000 for the nine months ended September 30, 2026 and 2025, respectively. (3) Includes interest-earning deposits (cash) at other financial institutions. (4) Cost of all deposits, including noninterest-bearing demand deposits, was 2.05% and 2.30% for the nine months ended September 30, 2026 and 2025, respectively. (5) Net interest income divided by average interest-earning assets.

Previous wording

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 six months ended June 30, 2026 and the year ended December 31, 2025, we engaged in no off-balance sheet transactions likely to have a material effect on our financial condition, results of operations or cash flows.

Current wording

In the normal course of operations, First Fed engages in a variety of financial transactions which, in accordance with GAAP, 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. At September 30, 2026 and December 31, 2025, there were no off-balance sheet transactions likely to have a material effect on our financial condition.

Previous wording

The Company's most liquid assets are cash and cash equivalents followed by available-for-sale securities. The levels of these assets depend on our operating, financing, lending and investing activities during any given period. At June 30, 2026, cash and cash equivalents totaled $98.4 million and unpledged securities classified as available-for-sale had a market value of $236.8 million. The Bank pledged collateral of $512.7 million to support borrowings from the FHLB, with a remaining borrowing capacity of $157.7 million at June 30, 2026. The Bank also has an established discount window borrowing arrangement with the FRB, for which available-for-sale securities with a market value of $17.3 million were pledged as of June 30, 2026, providing a borrowing capacity of $16.7 million. Another source of short-term funding for the Bank is through PCBB's Fed Funds Borrowing Facility, which provides up to $50.0 million of unsecured borrowing for up to ten consecutive days. First Northwest has a $15.0 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 $1.5 million at June 30, 2026.

Current wording

The Company's most liquid assets are cash and cash equivalents followed by available-for-sale securities. The levels of these assets depend on our operating, financing, lending and investing activities during any given period. At September 30, 2026, cash and cash equivalents totaled $103.6 million and unpledged securities classified as available-for-sale had a market value of $263.3 million. The Bank pledged collateral of $546.9 million to support borrowings from the FHLB, with a remaining borrowing capacity of $173.1 million at September 30, 2026. The Bank also has an established discount window borrowing arrangement with the FRB, for which available-for-sale securities with a market value of $16.6 million were pledged as of September 30, 2026, providing a borrowing capacity of $16.0 million. Another source of short-term funding for the Bank is through PCBB's Fed Funds Borrowing Facility, which provides up to $50.0 million of unsecured borrowing for up to ten consecutive days. First Northwest has a $15.0 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 $1.5 million at September 30, 2026.

Previous wording

At June 30, 2026, we had commitments to fund $408,000 in standby letters of credit and $164.6 million in undisbursed loans, including $40.7 million in undisbursed construction loan commitments.

Current wording

At September 30, 2026, we had commitments to fund $509,000 in standby letters of credit and $170.0 million in undisbursed loans, including $39.1 million in undisbursed construction loan commitments.