2 months ago
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PORT ANGELES, Wash., Jan. 29, 2025 (GLOBE NEWSWIRE) -- First Northwest Bancorp (Nasdaq: FNWB) ("First Northwest" or the "Company") today reported a net loss of $2.8 million for the fourth quarter of 2024, compared to a net loss of $2.0 million for the third quarter of 2024 and a net loss of $5.5 million for the fourth quarter of 2023. Basic and diluted loss per share were $0.32 for the fourth quarter of 2024, compared to basic and diluted loss per share of $0.23 for the third quarter of 2024 and basic and diluted loss per share of $0.62 for the fourth quarter of 2023.
In the fourth quarter of 2024, the Company recorded adjusted pre-tax, pre-provision net revenue ("PPNR")(1) of $1.2 million, compared to a $49,000 adjusted PPNR loss for the preceding quarter and adjusted PPNR of $327,000 for the fourth quarter of 2023.
The Board of Directors of First Northwest declared a quarterly cash dividend of $0.07 per common share, payable on February 28, 2025, to shareholders of record as of the close of business on February 14, 2025.
Quote from First Northwest President and CEO, Matthew P. Deines:
"Although financial results in 2024 were adversely impacted by elevated credit costs, we are optimistic for continued improvement in asset quality in early 2025. During the fourth quarter, our pre-provision net revenue (1) grew to $1.2 million with modest margin improvement as we successfully reduced FHLB borrowings. As we look ahead to 2025, we are laser focused on growing core commercial and retail customer relationships while resolving problem assets, improving profitability and maintaining our strong capital position. Highlights for 2024 include the termination of our compliance Consent Order with the FDIC, reduction of core operating expenses and improvement in our liquidity position with the loan to deposit ratio below 100% at year-end. I'd like to thank all our employees for their efforts and contributions in 2024, and for making a positive impact in the communities we serve."
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Key Points for Fourth Quarter and Going Forward
Provision for credit losses:
- The Company recorded a $3.8 million provision for credit losses on loans in the fourth quarter of 2024, primarily due to charge-offs of six commercial business loans. This compares to loan credit loss provisions of $3.1 million for the preceding quarter and $1.2 million for the fourth quarter of 2023.
- We believe the reserve on individually analyzed loans does not represent a universal decline in the collectability of all loans in the portfolio. We continue to work on resolution plans for all troubled borrowers. The provision for credit losses on loans had a significant negative impact on net income for the fourth quarter of 2024.
First Fed Bank's ("First Fed" or the "Bank") balance sheet restructure continues to have a positive impact:
- The fair value hedge on loans, tied to the compounded overnight index swap using the secured overnight financing rate index, which was established in the first quarter of 2024, added $1.1 million to interest income for the year. The hedge successfully reduced the Bank's liability sensitivity, and lowered the overall interest rate risk profile. The hedge also enhanced earnings due to a favorable contract position during the 2024 interest rate environment. The Bank expects to maintain a positive carry on its derivative for up to an additional 25-basis points of rate cuts.
- During 2024, bank-owned life insurance policies ("BOLI") were reinvested into higher yielding products. In the fourth quarter of 2024, a $8.5 million policy was surrendered and reinvested into a policy earning 6.01% and a $922,000 policy earning 1.64% was exchanged and reinvested into a policy earning 3.99%. Total policy conversions during 2024 increased the annual pre-tax net yield earned on the total BOLI portfolio by 74-basis points. The remaining surrender transaction is expected to be completed during the first quarter of 2025.
- Investment security purchases during the fourth quarter of 2024 totaled $47.1 million, carrying a weighted-average yield of 6.7% at purchase and a weighted-average life of 3.1 years. The annualized interest income on these securities is anticipated to provide $2.6 million in revenue for 2025.
(1) See reconciliation of Non-GAAP Financial Measures later in this release.
Selected Quarterly Financial Ratios:
| As of or For the Quarter Ended | |||||||||||||||
| December 31,
2024 | September 30, 2024 | June 30,
2024 | March 31, 2024 | December 31,
2023 | |||||||||||
| Performance ratios: (1) | |||||||||||||||
| Return on average assets | -0.51 | % | -0.36 | % | -0.40 | % | 0.07 | % | -1.03 | % | |||||
| Adjusted PPNR return on average assets (2) | 0.22 | -0.01 | 0.10 | 0.34 | -0.06 | ||||||||||
| Return on average equity | -6.92 | -4.91 | -5.47 | 0.98 | -14.05 | ||||||||||
| Net interest margin (3) | 2.73 | 2.70 | 2.76 | 2.76 | 2.84 | ||||||||||
| Efficiency ratio (4) | 92.2 | 100.3 | 72.3 | 88.8 | 150.8 | ||||||||||
| Equity to total assets | 6.89 | 7.13 | 7.17 | 7.17 | 7.42 | ||||||||||
| Book value per common share | $ | 16.45 | $ | 17.17 | $ | 16.81 | $ | 17.00 | $ | 16.99 | |||||
| Tangible performance ratios: (1) | |||||||||||||||
| Tangible common equity to tangible assets (2) | 6.83 | % | 7.06 | % | 7.10 | % | 7.10 | % | 7.35 | % | |||||
| Return on average tangible common equity (2) | -6.99 | -4.96 | -5.53 | 0.99 | -14.20 | ||||||||||
| Tangible book value per common share (2) | $ | 16.29 | $ | 17.00 | $ | 16.64 | $ | 16.83 | $ | 16.83 | |||||
| Capital ratios (First Fed): (5) | |||||||||||||||
| Tier 1 leverage | 9.4 | % | 9.4 | % | 9.4 | % | 9.7 | % | 9.9 | % | |||||
| Common equity Tier 1 capital | 12.4 | 12.2 | 12.4 | 12.6 | 13.1 | ||||||||||
| Total risk-based | 13.6 | 13.4 | 13.5 | 13.6 | 14.1 | ||||||||||
| (1 | ) | Performance ratios are annualized, where appropriate. |
| (2 | ) | See reconciliation of Non-GAAP Financial Measures later in this release. |
| (3 | ) | Net interest income divided by average interest-earning assets. |
| (4 | ) | Total noninterest expense as a percentage of net interest income and total other noninterest income. |
| (5 | ) | Current period capital ratios are preliminary and subject to finalization of the FDIC Call Report. |
Adjusted Pre-tax, Pre-Provision Net Revenue
(1)Adjusted PPNR for the fourth quarter of 2024 increased $1.3 million to $1.2 million, compared to an adjusted PPNR loss of $49,000 for the preceding quarter, and increased $1.5 million from an adjusted PPNR $327,000 loss in the fourth quarter one year ago.
| For the Quarter Ended | For the Year Ended | |||||||||||||||||||||
| (Dollars in thousands) | December 31, 2024 | September 30, 2024 | June 30,
2024 | March 31, 2024 | December 31, 2023 | December 31, 2024 | December 31,
2023 | |||||||||||||||
| Net interest income | $ | 14,137 | $ | 14,020 | $ | 14,235 | $ | 13,928 | $ | 14,195 | $ | 56,320 | $ | 61,432 | ||||||||
| Total noninterest income | 1,300 | 1,779 | 7,347 | 2,188 | (2,929 | ) | 12,614 | 4,020 | ||||||||||||||
| Total revenue | 15,437 | 15,799 | 21,582 | 16,116 | 11,266 | 68,934 | 65,452 | |||||||||||||||
| Total noninterest expense | 14,233 | 15,848 | 15,609 | 14,303 | 16,990 | 59,993 | 61,454 | |||||||||||||||
| PPNR (1) | 1,204 | (49 | ) | 5,973 | 1,813 | (5,724 | ) | 8,941 | 3,998 | |||||||||||||
| Selected nonrecurring adjustments to PPNR | ||||||||||||||||||||||
| Less: Net gain on sale of premises and equipment | - | - | 7,919 | - | - | 7,919 | - | |||||||||||||||
| Sale leaseback taxes and assessments included in occupancy and equipment | - | - | (359 | ) | - | - | (359 | ) | - | |||||||||||||
| Net loss on sale of investment securities | - | - | (2,117 | ) | - | (5,397 | ) | (2,117 | ) | (5,397 | ) | |||||||||||
| Adjusted PPNR (1) | $ | 1,204 | $ | (49 | ) | $ | 530 | $ | 1,813 | $ | (327 | ) | $ | 3,498 | $ | 9,395 | ||||||
(1) See reconciliation of Non-GAAP Financial Measures later in this release.
- Total interest income was relatively unchanged at $28.2 million for the fourth quarter of 2024, compared to the previous quarter, and increased $1.9 million compared to $26.3 million in the fourth quarter of 2023. Interest income decreased in the fourth quarter of 2024 primarily due to a decrease in the income earned on the securities derivative combined with lower FHLB dividends and reduced interest income received on Company deposit accounts. Higher yields on performing loans during the fourth quarter of 2024 were partially offset by nonaccrual interest adjustments totaling $46,000. Interest and fees on loans increased year-over-year as the loan portfolio grew. Loan yields increased over the prior year due to higher rates on new originations as well as the repricing of variable and adjustable-rate loans.
- The net interest margin increased to 2.73% for the fourth quarter of 2024, from 2.70% for the prior quarter, and decreased 11-basis points from 2.84% for the fourth quarter of 2023. The Company reported reduced rates and declining volume of borrowings during the quarter which lowered costs; however, these savings were partially offset by an increase in cost due to a higher volume of customer deposits. The decrease in net interest margin from the same quarter one year ago is due to higher funding costs for deposits and borrowed funds.
- Noninterest income included a $1.8 million write down on an equity investment in an organization that is involved in a lawsuit, partially offset by a $1.5 million BOLI death benefit payment received due to the passing of an employee.
- Noninterest expense for the fourth quarter of 2024 decreased mainly due to a $1.2 million reduction in compensation related to nonrecurring payouts in the previous quarter combined with a reduced incentive accrual and lower headcount in the fourth quarter of 2024. FDIC assessment, state taxes, advertising and other discretionary spending also decreased from the previous quarter.
Allowance for Credit Losses on Loans ("ACLL") and Credit Quality
The allowance for credit losses on loans ("ACLL") decreased $1.5 million to $20.5 million at December 31, 2024, from $22.0 million at September 30, 2024. The ACLL as a percentage of total loans was 1.21% at December 31, 2024, a decrease from 1.27% at September 30, 2024, and an increase from 1.05% one year earlier. The pooled loan reserve decreased $1.5 million during the fourth quarter of 2024, primarily due to the decreases in multi-family, construction, and consumer loan balances combined with decreases resulting from lower loss factors applied to commercial business and commercial real estate loans, partially offset by higher loss factors applied to one-to-four family and other consumer loans.
Nonperforming loans totaled $30.5 million at December 31, 2024, an increase of $139,000 from September 30, 2024. ACLL to nonperforming loans decreased to 67% at December 31, 2024, from 72% at September 30, 2024, and 94% at December 31, 2023. This ratio continued to decline as higher balances of real estate loans are included in nonperforming assets with no significant corresponding increase to the ACLL as these collateral dependent loans were considered adequately reserved for based on information available at each period end.
Classified loans decreased $4.4 million to $42.5 million at December 31, 2024, from $46.9 million at September 30, 2024, primarily due to charge-offs totaling $3.9 million on six commercial business loans during the fourth quarter. A
