First Northwest Bancorp

What they do

First Northwest Bancorp operates through its wholly owned subsidiary, First Fed, a community-oriented commercial bank founded in 1923, with 12 full-service branches and 5 business centers across Clallam, Jefferson, King, Kitsap, Snohomish, and Whatcom counties. The bank originates commercial real estate, multi-family, commercial business, auto, consumer, residential mortgage, home equity, and construction loans, and offers traditional deposit products. Additionally, the company holds limited partnership investments in fintech-focused funds and a 33% interest in MWG, a boutique investment bank, plus a 25% general partner interest in Meriwether Group Capital, LLC.

Revenue drivers

• Loan portfolio (commercial real estate, multi-family, commercial business) — Primary interest income source; the company has increased origination of these loan types to diversify and boost interest income.
• Residential mortgage loans (originated for sale and retained) — Mortgages are primarily sold into the secondary market to generate noninterest gain on sale and servicing fee revenue, with some retained to enhance interest income.
• Consumer and auto loans (purchased programs) — Purchased auto loan programs and purchased manufactured homes add to the loan portfolio and interest income.
• Deposit products (transaction, savings, money market, CDs) — Deposits are the primary funding source for lending and investing; interest expense on these products is a cost, but they generate net interest margin.

Recent performance

The company reported a net loss of $4.2 million for fiscal 2025, with diluted EPS of -$0.48, following a net loss of $6.6 million in 2024. Operating cash flow turned sharply negative to -$2.8 million in 2025 from $16.9 million in 2024. As of June 30, 2026, total assets were $2.12 billion, liabilities $1.97 billion, and shareholder equity $158.3 million. Dividends per share were reduced to $0.14 in 2025 from $0.28 in 2024. The latest balance sheet shows a modest equity cushion of about 7.5% of assets.

Strategy

The company is focused on diversifying its loan portfolio toward commercial real estate, multi-family, and commercial business lending to increase interest income. It is unwinding non-core investments, including redeeming its interest in MWGC in full at par and signing a redemption agreement to exit the Hero Fund through capital distributions beginning April 2026. A King County branch is scheduled to close on April 30, 2026, suggesting a consolidation of the branch network. The bank continues to originate residential mortgages primarily for sale to generate fee income and manage interest rate risk.

Risks

• Credit quality deterioration — The loan portfolio, particularly commercial real estate and multi-family loans, is exposed to adverse changes in credit quality, which could lead to higher loan loss provisions and further losses.
• Interest rate sensitivity — Changes in interest rates can affect deposit costs, loan demand, and the value of securities, which may compress net interest margin.
• Liquidity pressure — The bank faces risk of customer deposit withdrawals, which could strain liquidity and force asset sales at unfavorable prices.
• Investment-related losses — The limited partnership investments in fintech and private credit funds carry mark-to-market risk and liquidity constraints, as evidenced by the recent redemption actions.

Outlook

Management's forward-looking statements cite risks from economic conditions, regulatory changes, and the potential for a recession affecting their market areas. They are executing redemption agreements to unwind the Hero Fund and have already redeemed the MWGC interest, indicating a deliberate reduction of non-core investments. The closing of a King County branch suggests ongoing operational rationalization to cut costs. No specific financial guidance was provided in the excerpts.