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First Northwest Bancorp Reports Results of Operations for the Quarter and Transition Period Ended December 31, 2017

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PORT ANGELES, Wash., Feb. 01, 2018 (GLOBE NEWSWIRE) -- First Northwest Bancorp (NASDAQ:FNWB) ("Company"), the holding company for First Federal Savings and Loan Association of Port Angeles ("Bank"), announced its operating results for the quarter and six month transition period ended December 31, 2017. The Company reported a net loss of $(114,000), or $(0.01) loss per basic and diluted share, for the quarter ended December 31, 2017, compared to net income of $1.8 million, or $0.17 earnings per basic and diluted share, for the quarter ended September 30, 2017, a decrease of $1.9 million. The current quarter's net income decreased $1.3 million compared to net income of $1.2 million for the same quarter in 2016. The decrease in net income compared to the previous quarter was mainly due to an estimated revaluation adjustment of the net deferred tax asset ("DTA revaluation") through the provision for income taxes as a result of the passage of the U.S. Tax Cuts and Jobs Act ("Tax Act") on December 22, 2017. The estimated DTA revaluation resulted in a $1.2 million increase to the Company's income tax expense and an $0.11 reduction in earnings per basic and diluted share for the quarter and six month transition period ended December 31, 2017. The reconciliation of net income eliminating the non-recurring DTA revaluation, which the Company believes facilitates an assessment of its banking operations, is included at the end of this release.

Larry Hueth, President and CEO, commented, "Earnings for the quarter were reduced due to the $1.2 million impact the Tax Act had on our provision for income taxes and the expenses related to the addition of our fourth branch location on Bainbridge Island, which opened on January 8, 2018.  Excluding the DTA revaluation, non-GAAP net income would have been $1.1 million for the quarter, or $0.10 earnings per basic and diluted share.

"We are also pleased with the growth in net loans and deposits of 12.8% and 11.5%, respectively, year over year and remain committed to further improving our earnings and increasing shareholder value."

Quarter highlights (at or for the quarter ended December 31, 2017)

  • Net income decreased $1.9 million compared to the quarter ended September 30, 2017, primarily due to a $1.2 million DTA revaluation through the provision for income taxes as a result of the passage of the Tax Act and, excluding the DTA revaluation, non-GAAP net income would have been $1.1 million for the quarter;
  • Basic and diluted earnings per share decreased to $(0.01) compared to $0.17 for the quarter ended September 30, 2017 and, excluding the DTA revaluation as a result of the Tax Act, would have been $0.10 for the quarter;
  • Loans receivable increased $52.2 million compared to the quarter ended September 30, 2017, primarily due to the purchase of a $28.0 million pool of one- to four-family loans;
  • Deposits increased $34.1 million during the quarter due to promotional and ongoing business development activities in new and existing markets;
  • The Company repurchased 39,800 shares of its common stock at an average price of $17.05 per share during the quarter under the 2017 stock repurchase plan approved in September 2017.

Balance Sheet Review

During the quarter ended December 31, 2017, total assets increased $65.4 million to $1.2 billion, primarily due to an increase in net loans receivable. Year to date total assets increased $171.8 million from $1.0 billion at December 31, 2016, primarily due to growth in net loans receivable and investment securities.

Investment securities decreased $803,000 during the quarter to $340.4 million at December 31, 2017, and increased $64.3 million as compared to $276.1 million at December 31, 2016.  We saw the results of our leverage strategy implemented in the prior quarter and continued to leverage our capital as we also continue to evaluate share repurchases and other capital management strategies. We continue to focus on growing our loan portfolio and improving our earning asset mix over the long term.

At December 31, 2017, U.S. government agency issued mortgage-backed securities ("MBS agency") comprised the largest portion of our investment portfolio at 53.0%, and totaled $180.3 million at December 31, 2017, an increase during the quarter of $5.7 million from $174.6 million at September 30, 2017. Other investment securities were $139.5 million at December 31, 2017, a decrease of $3.8 million from $143.3 million at September 30, 2017. Total investment securities increased $64.3 million at December 31, 2017 compared to $276.1 million at December 31, 2016, which included a $12.6 million increase in mortgage-backed securities and a $51.7 million increase in other investment securities. The year over year increase was the result of new investment purchases partially offset by sales, prepayment activity, and normal amortization. The estimated average life of the total investment securities portfolio was 5.3 years at December 31, 2017 and September 30, 2017, compared to 4.8 years at December 31, 2016. The average repricing term of our investment securities portfolio was approximately 3.5 years as of both December 31, 2017 and September 30, 2017 and 4.3 years as of December 31, 2016, based on the interest rate environment at those times. The reduction in time for rates to reset in our investment portfolio was the result of the purchase of adjustable rate securities as part of our leverage strategy coupled the reinvestment of cash flows from sales, prepayments, and amortization of certain longer-term fixed-rate investments. We also expect our investment portfolio will be used as a source of liquidity to fund our anticipated loan growth.

Total loans, excluding loans held for sale, increased $51.9 million to $786.1 million at December 31, 2017 from $734.2 million at September 30, 2017, a result of a pool purchase of one- to four-family residential loans and new loan originations partially offset by normal amortization, prepayment activity, and one- to four-family residential loan sales. One- to four-family residential, multi-family, commercial real estate, home equity and other consumer loans increased $31.7 million, $14.8 million, $8.1 million, $3.4 million, and $4.8 million, respectively, while construction and land and commercial business loans decreased $10.8 million and $82,000, respectively. We will remain focused on construction loan origination activity as real estate values and general economic conditions in our market areas continue to remain strong. There were $59.4 million in undisbursed construction loan commitments at December 31, 2017 as compared to $50.8 million at September 30, 2017, an increase of $8.6 million as we continued to originate loans for new construction projects as completed projects converted to permanent financing. Other consumer loans increased primarily as a result of auto loans originated as part of our indirect lending programs. Compared to December 31, 2016, total loans, excluding loans held for sale, increased $88.8 million attributable to increases in one-to four-family residential loans of $26.9 million, multi-family loans of $22.8 million, other consumer loans of $14.7 million, commercial real estate loans of $12.7 million, construction and land loans of $7.2 million, and home equity loans of $4.6 million, partially offset by a decrease in commercial business loans of $64,000.

Loans receivable consisted of the following at the dates indicated:

                   
  December 31,
2017
  September 30,
2017
  December 31,
2016
  Three
Month
Change
  One
Year
Change
  (Dollars in thousands)
Real Estate:                  
One-to four-family $ 355,391     $ 323,675     $ 328,456     9.8 %   8.2 %
Multi-family 73,767     58,989     50,977     25.1     44.7  
Commercial real estate 202,956     194,813     190,291     4.2     6.7  
Construction and land 71,145     81,985     63,902     (13.2 )   11.3  
Total real estate loans 703,259     659,462     633,626     6.6     11.0  
                   
Consumer:                  
Home equity 38,473     35,059     33,902     9.7     13.5  
Other consumer 28,106     23,329     13,410     20.5     109.6  
Total consumer loans 66,579     58,388     47,312     14.0     40.7  
                   
Commercial business loans 16,303     16,385     16,367     (0.5 )   (0.4 )
                   
Total loans 786,141     734,235     697,305     7.1     12.7  
Less:                  
Net deferred loan fees 724     858     1,190     (15.6 )   (39.2 )
Premium on purchased loans, net (2,454 )   (2,122 )   (2,366 )   15.6     3.7  
Allowance for loan losses 8,760     8,608     8,060     1.8     8.7  
Total loans receivable, net $ 779,111     $ 726,891     $ 690,421     7.2 %   12.8 %
                   

During the quarter ended December 31, 2017, total liabilities increased $66.2 million to $1.0 billion at December 31, 2017 from $972.4 million at September 30, 2017. The increase was primarily the result of an increase in customer deposits of $34.1 million to $885.0 million at December 31, 2017, from $850.9 million at September 30, 2017 and an increase in borrowings of $32.4 million to $144.1 million at December 31, 2017, from $111.7 million at September 30, 2017. We utilized short-term FHLB advances during the quarter to manage our cash flow needs and partially fund the purchase of a one- to four-family loan pool. Deposits grew as the result of an increase of $17.3 million in transaction accounts, $8.6 million in money market accounts, and $8.1 million in certificates of deposit.

Total liabilities increased $171.7 million over the last year, mainly attributable to an increase in deposits of $91.0 million compared to $794.1 million at December 31, 2016, and an increase in borrowings of $78.2 million compared to $65.9 million at December 31, 2016, primarily to leverage our balance sheet in advance of anticipated continued deposit and loan growth as part of our expansion efforts. Deposit account increases were primarily the result of our continuing efforts to expand commercial and consumer deposit relationships in our Kitsap and Whatcom County, Washington locations, as well as within our historic Clallam and Jefferson County, Washington locations.

Total shareholders' equity decreased $883,000 during the quarter to $177.0 million at December 31, 2017, mainly due to an increase in unrealized loss on investments of $856,000.

Operating Results

Net income decreased $1.9 million to a loss of $(114,000) for the quarter ended December 31, 2017 compared to earnings of $1.8 million for the quarter ended September 30, 2017, and decreased $1.3 million compared to the quarter ended December 31, 2016. The decreases were mainly due to the DTA revaluation of $1.2 million resulting from the passage of the Tax Act.

Net interest income after provision for loan losses decreased to $8.3 million for the quarter ended December 31, 2017 from $8.5 million for the preceding quarter due primarily to an increase in the provision for loan losses of $200,000. Net interest income after the provision for loan losses increased $1.1 million compared to $7.3 million for the quarter ended December 31, 2016, due to an increase in interest income of $862,000 coupled with a decrease in the provision for loan losses of $210,000. The increase in the provision for loan losses during the current quarter was due to total loan growth. Total interest income increased $200,000 during the quarter to $10.2 million for the quarter ended December 31, 2017 as compared to the previous quarter, primarily due to an increase in interest and fees on loans receivable and an increase due to higher average yields on investment securities. Total interest income increased $1.3 million as compared to $8.9 million for the quarter ended December 31, 2016, primarily due to an increase in the average balance of loans receivable.

Total interest expense increased $133,000 to $1.7 million for the quarter ended December 31, 2017 as compared to the quarter ended September 30, 2017, and increased $461,000 as compared to the quarter ended December 31, 2016, due to the combined effects of an increase in the average balances of interest-bearing customer deposits as we grow, an increase in interest paid on customer deposits as we compete to attract and retain deposits, and an increase in our utilization of short-term FHLB advances to fund our operations and purchase additional earning assets.

The net interest margin decreased nine basis points to 3.11% for the quarter ended December 31, 2017 compared to 3.20% for the prior quarter ended September 30, 2017, and decreased one basis point from 3.12% for the same period in 2016. The net interest margin was lower during the quarter ended December 31, 2017, as compared to the previous quarter due to discounts realized into income as certain investment securities were repaid, coupled with the prepayment of certain loans receivable that resulted in the early recapture of deferred fee revenue during the quarter ended September 30, 2017 that were not present in the quarter ended December 31, 2017. 

Noninterest income for the quarter ended December 31, 2017 decreased $341,000, to $1.4 million, from $1.7 million in the prior quarter ended September 30, 2017. The decreases were primarily due to reduced net gain on the sale of loans of $255,000, mortgage servicing fees of $58,000, and the net gain on the sale of investment securities of $43,000. Noninterest income saw a modest decrease of $28,000, as compared to $1.3 million for the same quarter in 2016, mainly as a result of reduced net gain on the sale of investment securities offset by decreases in the cash surrender value of bank-owned life insurance and net gain on sale of loans.

Noninterest expense increased $533,000 to $8.3 million for the quarter ended December 31, 2017, compared to $7.8 million for the quarter ended September 30, 2017, primarily due to an increase in occupancy and equipment expense as a result of ongoing expenses related to maintaining our bank's facilities and equipment as well as expenses related to the opening of our newest branch on Bainbridge Island, Washington, which opened on January 8, 2018. In addition, we saw an increase in other non-interest expense of $124,000, advertising of $112,000, and compensation and benefits expense of $110,000, which were partially offset by a decrease in professional fees of $35,000. Noninterest expense increased $1.5 million for the quarter ended December 31, 2017 compared to the same quarter in 2016. The increase was primarily a result of compensation and benefits of $774,000, other non-interest expense of $200,000, and professional fees of $107,000, as we continued to grow our business.

Capital Ratios and Credit Quality

The Company and the Bank continue to maintain capital levels in excess of applicable regulatory requirements and the Bank was categorized as "well-capitalized" at December 31, 2017.

Credit quality remains strong with nonperforming loans decreasing $259,000 during the quarter ended December 31, 2017, to $1.5 million from $1.8 million at September 30, 2017, mainly attributable to a decrease in nonperforming one- to four-family residential loans of $294,000. Nonperforming loans to total gross loans was 0.2% at both December 31, 2017 and September 30, 2017 and was 0.4% at December 31, 2016. Improvements in asset quality during the year are reflected in an increase in the percentage of the allowance for loan losses to nonperforming loans to 570.7% at December 31, 2017 from 479.8% at September 30, 2017, and 322.7% at December 31, 2016. Classified loans increased $3.4 million to $6.7 million at December 31, 2017 from $3.3 million at September 30, 2017, mainly as a result of a downgrade of risk rating on a $2.7 million commercial loan relationship, and were $3.5 million at December 31, 2016. Our allowance for loan losses as a percentage of total loans was 1.1% at December 31, 2017, and 1.2% at both September 30, 2017 and December 31, 2016.

About the Company

First Northwest Bancorp, a Washington corporation, is the bank holding company for First Federal Savings and Loan Association of Port Angeles. First Federal is a Washington-chartered, community-based savings bank, primarily serving Western Washington State, with thirteen banking locations, eight located within Clallam and Jefferson counties, two in Kitsap County, two in Whatcom County, and a home lending center in King County.

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 Company's 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 SEC's 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 fiscal 2018 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us and could negatively affect the Company's operations and stock price performance.

  

                   
FIRST NORTHWEST BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands) (Unaudited)
                   
  December 31,   September 30,   December 31   Three
Month
  One
Year
ASSETS 2017   2017   2016   Change   Change
                   
Cash and due from banks $ 13,777     $ 12,717     $ 14,433     8.3 %   (4.5 )%
Interest-bearing deposits in banks 23,024     12,292     8,216     87.3     180.2  
Investment securities available for sale, at fair value 290,242     290,159     222,304         30.6  
Investment securities held to maturity, at amortized cost 50,126     51,012     53,755     (1.7 )   (6.8 )
Loans held for sale 788         477     100.0     65.2  
Loans receivable (net of allowance for loan losses of $8,760, $8,608, and $8,060) 779,111     726,891     690,421     7.2     12.8  
Federal Home Loan Bank (FHLB) stock, at cost 7,023     5,729     3,799     22.6     84.9  
Accrued interest receivable 3,745     3,498     3,015     7.1     24.2  
Premises and equipment, net 13,739     13,213     13,684     4.0     0.4  
Mortgage servicing rights, net 1,095     1,112     1,036     (1.5 )   5.7  
Bank-owned life insurance, net 28,724     28,570     28,645     0.5     0.3  
Real estate owned and repossessed assets 23     86     110     (73.3 )   (79.1 )
Prepaid expenses and other assets 4,242     5,020     3,920     (15.5 )   8.2  
                   
Total assets $ 1,215,659     $ 1,150,299     $ 1,043,815     5.7 %   16.5 %
                   
LIABILITIES AND SHAREHOLDERS' EQUITY                  
                   
Deposits $ 885,032     $ 850,933     $ 794,072     4.0 %   11.5 %
Borrowings 144,100     111,657     65,883     29.1     118.7  
Accrued interest payable 325     217     204     49.8     59.3  
Accrued expenses and other liabilities 7,929     7,600     5,557     4.3     42.7  
Advances from borrowers for taxes and insurance 1,228     1,964     1,207     (37.5 )   1.7  
                   
Total liabilities 1,038,614     972,371     866,923     6.8     19.8  
                   
Shareholders' Equity                  
Preferred stock, $0.01 par value, authorized 5,000,000 shares, no shares issued or outstanding             n/a   n/a
Common stock, $0.01 par value, authorized 75,000,000 shares; issued and outstanding 11,785,507 at December 31, 2017; issued and outstanding 11,839,707 at September 30, 2017; and issued and outstanding 12,153,946 at December 31, 2016 118     118     122         (3.3 )
Additional paid-in capital 111,157     111,175     114,021         (2.5 )
Retained earnings 78,551     78,725     75,833     (0.2 )   3.6  
Accumulated other comprehensive (loss) income, net of tax (1,573 )   (717 )   (1,237 )   (119.4 )   (27.2 )
Unearned employee stock ownership plan (ESOP) shares (11,208 )   (11,373 )   (11,847 )   1.5     5.4  
                   
Total shareholders' equity 177,045     177,928     176,892     (0.5 )   0.1  
                   
Total liabilities and shareholders' equity $ 1,215,659     $ 1,150,299     $ 1,043,815     5.7 %   16.5 %
                   


           
FIRST NORTHWEST BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)  (Unaudited)
           
  Quarter Ended   Three   One
  December 31,   September 30,   December 31,   Month   Year
  2017   2017   2016   Change   Change
INTEREST INCOME                  
Interest and fees on loans receivable $ 8,055     $ 7,928     $ 7,193     1.6 %   12.0 %
Interest on mortgage-backed and related securities 1,265     1,280     1,072     (1.2 )   18.0  
Interest on investment securities 841     765     617     9.9     36.3  
Interest-bearing deposits and other 37     34     11     8.8     236.4  
FHLB dividends 45     36     27     25.0     66.7  
Total interest income 10,243     10,043     8,920     2.0     14.8  
                   
INTEREST EXPENSE                  
Deposits 970     911     696     6.5     39.4  
Borrowings 743     669     556     11.1     33.6  
Total interest expense 1,713     1,580     1,252     8.4     36.8  
                   
Net interest income 8,530     8,463     7,668     0.8     11.2  
                   
PROVISION FOR LOAN LOSSES 200         410     100.0     (51.2 )
                   
Net interest income after provision for loan losses 8,330     8,463     7,258     (1.6 )   14.8  
                   
NONINTEREST INCOME                  
Loan and deposit service fees 887     913     889     (2.8 )   (0.2 )
Mortgage servicing fees, net of amortization 56     114     56     (50.9 )    
Net gain on sale of loans 122     377     160     (67.6 )   (23.8 )
Net gain on sale of investment securities 93     136         (31.6 )   100.0  
Increase in cash surrender value of bank-owned life insurance 153     158     193     (3.2 )   (20.7 )
Other income 46         31     100.0     48.4  
Total noninterest income 1,357     1,698     1,329     (20.1 )   2.1  
                   
NONINTEREST EXPENSE                  
Compensation and benefits 4,576     4,466     3,802     2.5     20.4  
Real estate owned and repossessed assets expense, net 29     8     13     262.5     123.1  
Data processing 640     604     687     6.0     (6.8 )
Occupancy and equipment 1,168     1,022     1,002     14.3     16.6  
Supplies, postage, and telephone 221     211     170     4.7     30.0  
Regulatory assessments and state taxes 131     128     100     2.3     31.0  
Advertising 254     142     160     78.9     58.8  
Professional fees 431     466     324     (7.5 )   33.0  
FDIC insurance premium 75     69     7     8.7     971.4  
Other 815     691     615     17.9     32.5  
Total noninterest expense 8,340     7,807     6,880     6.8     21.2  
                   
INCOME BEFORE PROVISION FOR INCOME TAXES 1,347     2,354     1,707     (42.8 )   (21.1 )
                   
PROVISION FOR INCOME TAXES 1,461     581     519     151.5     181.5  
                   
NET (LOSS) INCOME $ (114 )   $ 1,773     $ 1,188     (106.4 )%   (109.6 )%
                   
                   
Basic and diluted earnings per share $ (0.01 )   $ 0.17     $ 0.11     (105.9 )%   (109.1 )%
                   



       
FIRST NORTHWEST BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data) (Unaudited)
       
  Six Months Ended   One
  December 31,   Year
  2017   2016   Change
INTEREST INCOME          
Interest and fees on loans receivable $ 15,983     $ 13,912     14.9 %
Interest on mortgage-backed and related securities 2,545     2,196     15.9  
Interest on investment securities 1,606     1,266     26.9  
Interest on deposits and other 71     24     195.8  
FHLB dividends 81     62     30.6  
Total interest income 20,286     17,460     16.2  
           
INTEREST EXPENSE          
Deposits 1,881     1,343     40.1  
Borrowings 1,412     1,098     28.6  
Total interest expense 3,293     2,441     34.9  
           
Net interest income 16,993     15,019     13.1  
           
PROVISION FOR LOAN LOSSES 200     760     (73.7 )
           
Net interest income after provision for loan losses 16,793     14,259     17.8  
           
NONINTEREST INCOME          
Loan and deposit service fees 1,800     1,802     (0.1 )
Mortgage servicing fees, net of amortization 170     119     42.9  
Net gain on sale of loans 499     429     16.3  
Net gain on sale of investment securities 229         100.0  
Increase in cash surrender value of bank-owned life insurance 311     363     (14.3 )
Other income 46     60     (23.3 )
Total noninterest income 3,055     2,773     10.2  
           
NONINTEREST EXPENSE          
Compensation and benefits 9,042     7,962     13.6  
Real estate owned and repossessed assets expense, net 37     52     (28.8 )
Data processing 1,244     1,451     (14.3 )
Occupancy and equipment 2,190     1,899     15.3  
Supplies, postage, and telephone 432     320     35.0  
Regulatory assessments and state taxes 259     234     10.7  
Advertising 396     289     37.0  
Professional fees 897     681     31.7  
FDIC insurance premium 144     126     14.3  
Other 1,506     1,326     13.6  
Total noninterest expense 16,147     14,340     12.6  
           
INCOME BEFORE PROVISION FOR INCOME TAXES 3,701     2,692     37.5  
           
PROVISION FOR INCOME TAXES 2,042     853     139.4  
           
NET INCOME $ 1,659     $ 1,839     (9.8 )%
           
           
Basic and diluted earnings per share $ 0.16     $ 0.16     %
           


   
FIRST NORTHWEST BANCORP AND SUBSIDIARY
Selected Financial Ratios and Other Data
(Unaudited)
   
  As of or For the Quarter Ended
  December 31,   September 30,   June 30,   March 31,   December 31,
  2017   2017   2017   2017   2016
Performance ratios: (1)                  
Return on average assets (0.04 )%   0.63 %   0.41 %   0.80 %   0.46 %
Return on average equity (0.26 )   3.96     2.49     4.85     2.61  
Average interest rate spread 2.92     3.00     3.16     3.01     2.95  
Net interest margin (2) 3.11     3.20     3.34     3.18     3.12  
Efficiency ratio (3) 84.4     76.8     81.7     72.8     76.5  
Average interest-earning assets to average interest-bearing liabilities 131.8     132.3     132.7     133.5     134.0  
Book value per common share $ 15.02     $ 15.03     $ 14.93     $ 14.78     $ 14.55  
                   
Asset quality ratios:                  
Nonperforming assets to total assets at end of period (4) 0.1 %   0.2 %   0.2 %   0.2 %   0.2 %
Nonperforming loans to total gross loans (5) 0.2     0.2     0.3     0.3     0.4  
Allowance for loan losses to nonperforming loans (5) 570.7     479.8     445.1     354.5     322.7  
Allowance for loan losses to total loans receivable 1.1     1.2     1.2     1.2     1.2  
Net charge-offs to average outstanding loans                  
                   
Capital ratios (First Federal):                  
Tier 1 leverage 12.5 %   12.8 %   13.2 %   13.1 %   13.4 %
Common equity Tier 1 capital 18.0     18.8     19.2     19.2     19.7  
Tier 1 risk-based 18.0     18.8     19.2     19.2     19.7  
Total risk-based 19.1     20.0     20.4     20.4     20.9  
                   
                   
(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 other noninterest income.
(4)  Nonperforming assets consists of nonperforming loans (which include 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 SUBSIDIARY
Selected Financial Ratios and Other Data
(Unaudited) (continued)
   
  As of or For the Six Months Ended
  December 31,
  2017   2016
Selected Financial Ratios and Other Data:      
Performance ratios:      
Return on average assets 0.14 %   0.36 %
Return on average equity 0.93     1.98  
Average interest rate spread 2.96     2.91  
Net interest margin (1) 3.15     3.09  
Efficiency ratio (2) 80.5     80.6  
Average interest-earning assets to average interest-bearing liabilities 132.1     135.6  
       
Asset quality ratios:      
Nonperforming assets to total assets at end of period (3) 0.1 %   0.2 %
Nonperforming loans to total gross loans (4) 0.2     0.4  
Allowance for loan losses to nonperforming loans (4) 570.8     322.7  
Allowance for loan losses to total loans receivable 1.1     1.2  
Net charge-offs to average outstanding loans      
       
       
(1) Net interest income divided by average interest-earning assets.
(2) Total noninterest expense as a percentage of net interest income and total other noninterest income.
(3) Nonperforming assets consists of nonperforming loans (which include nonaccruing loans and accruing loans more than 90 days past due), real estate owned and repossessed assets.
(4) Nonperforming loans consists of nonaccruing loans and accruing loans more than 90 days past due.
 


Non-GAAP Financial Measures

In addition to results presented in accordance with generally accepted accounting principles in the United States of America (GAAP), this press release contains certain non-GAAP financial measures. The Company believes that certain non-GAAP financial measures provide investors with information useful in understanding the Company's financial performance; however, readers of this document are urged to review these non-GAAP financial measures in conjunction with the GAAP results as reported.

The following table provides the reconciliation of net income (GAAP) without the revaluation of the net deferred tax asset from the prior federal income tax rate of 34% to the 21% rate as result of the passage of the Tax Act in December 22, 2017. Net income (non-GAAP) does not consider the revaluation in the calculation of net income.

 

  Three Months Ended   Six Months Ended
  December 31,   December 31,
(Dollars in thousands, except per share data)  (Unaudited) 2017   2016   2017   2016
               
Net (loss) income (GAAP) $ (114 )   $ 1,188     $ 1,659     $ 1,839  
Adjustment:              
Deferred Tax Asset revaluation (1) 1,181         1,181      
               
Net income (non-GAAP) $ 1,067     $ 1,188     $ 2,840     $ 1,839  
               
               
Basic (loss) income per share:              
Basic and diluted (loss) income per share (GAAP) $ (0.01 )   $ 0.11     $ 0.16     $ 0.16  
Basic and diluted income per share (non-GAAP) $ 0.10     $ 0.11     $ 0.27     $ 0.16  
                               
(1) An adjustment to revalue the net deferred tax asset from the prior federal income tax rate of 34% to the 21% rate enacted into law December 2017 as part of the Tax Act was included in the provision for income taxes for the quarter ended December 31, 2017.
                               

Contact:
Larry Hueth, President and Chief Executive Officer
Regina Wood, EVP and Chief Financial Officer
First Northwest Bancorp
360-457-0461 

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