Breaking Down First Northwest Bancorp (FNWB) Financial Health: Key Insights for Investors

You're looking at First Northwest Bancorp (FNWB) and seeing a confusing picture, which is why we need to cut through the noise right now. The bank started 2025 with a solid Q1 net income of $1.5 million, a real turnaround from the prior quarter's loss, and they cut nonperforming loans by 14%, signaling a strengthening balance sheet. But then Q3 hit, and the net income dropped sharply to just $802,000, missing the analyst consensus for earnings per share (EPS) by a mile-they reported $0.09 against an expected $0.18. That's a 50% miss, and while the net interest margin (NIM) did tick up to 2.91%, the jump in noninterest expense due to a $1.1 million executive transition cost is a real headwind. So, what you have is a bank with a strengthening loan quality-nonperforming loans are down to $13.4 million at the end of Q3-but with significant, non-reccuring expense spikes that are defintely masking their core profitability. We need to look past the noise and figure out if the average analyst price target of $13.50 for the next year is realistic.

Revenue Analysis

You need to know where First Northwest Bancorp (FNWB)'s money is actually coming from to gauge the quality of its earnings. The direct takeaway is that while the trailing twelve months (TTM) revenue shows modest growth, a closer look at the third quarter of 2025 reveals a slight contraction in core income streams, largely due to asset balance shifts and investment volatility.

For the twelve months ending September 30, 2025, First Northwest Bancorp reported TTM revenue of $54.05 million. This represents a respectable year-over-year growth rate of +6.47%. However, a bank's revenue is best understood by breaking down its two main components: Net Interest Income (NII) and Noninterest Income.

The primary revenue source for First Northwest Bancorp, the holding company for First Fed Bank, is its core banking operations, which serve individuals, small businesses, non-profit organizations, and commercial customers in the Pacific Northwest. This revenue is split between the money earned from loans and investments (Interest Income) and the fees collected (Noninterest Income). Here's the quick math for the third quarter of 2025 (Q3 2025):

• Total Interest Income: $26.9 million
• Noninterest Income: $2.0 million

The good news is the Net Interest Margin (NIM), which is the difference between the interest income generated and the amount of interest paid out to depositors, is improving. It hit 2.91% in Q3 2025, up from 2.83% in the preceding quarter, marking five consecutive quarters of expansion. That's defintely a sign of better balance sheet management.

Still, you must be a realist about near-term revenue risks. In Q3 2025, Total Interest Income decreased by $221,000 compared to the previous quarter, which management attributed primarily to decreased average balances of interest-earning assets. Also, Noninterest Income dropped by $168,000 in Q3 2025, largely due to a decrease in the value of the company's equity and fintech partnership investments. This is where the strategic partnership segment, while offering potential upside, introduces volatility.

The company has been making strategic changes that impact its revenue base. In the first quarter of 2025, for example, core commercial and consumer customer growth was positive, but net loans and deposits were lower. This was a deliberate move, as it was largely the result of reducing funding to one large wholesale relationship and cutting back on brokered deposit balances. That action lowers interest expense, which helps NIM, but it also reduces the total asset base that generates interest income, creating a headwind for top-line revenue growth.

For a detailed breakdown of the bank's financial health, you can read our full analysis at Breaking Down First Northwest Bancorp (FNWB) Financial Health: Key Insights for Investors.

Profitability Metrics

You're looking for a clear picture of First Northwest Bancorp (FNWB) financial health, not just headlines. The core takeaway on profitability is that while the company has made a significant turnaround in 2025, moving from quarterly losses to positive net income, its margins and operational efficiency still trail industry averages. This is a story of stabilization, not yet of sector-leading performance.

For a bank, traditional Gross Profit isn't a useful metric; we look at Net Interest Income (NII) as the primary revenue engine. The most telling numbers come from the third quarter of 2025 (Q3 2025), which ended September 30, 2025. Here's the quick math on their core margins:

• Gross Profit Margin (Proxy: NII Margin on Total Revenue): The bank's Net Interest Income of $14.569 million against total revenue of $16.571 million implies a primary revenue margin of nearly 87.9%. This shows the vast majority of their revenue still comes from the spread on loans and deposits.
• Operating Profit Margin (Proxy: Adjusted PPNR Margin): Pre-Tax, Pre-Provision Net Revenue (PPNR) is a clean proxy for operating profit, stripping out taxes and the volatile Provision for Credit Losses. In Q3 2025, the Adjusted PPNR was only $340,000. Against total revenue, this is a thin operating margin of about 2.05%.
• Net Profit Margin: The reported net income of $802,000 on revenue of $16.57 million resulted in a Net Margin of 2.67%.

The Net Margin is defintely positive, but it's still very low for the sector.

Trends in Profitability and Operational Efficiency

The near-term trend is one of recovery and margin expansion, but the efficiency ratio remains a significant concern. The bank has successfully reversed a Q1 2025 net loss of $9.0 million to a Q2 2025 net income of $3.7 million, and then a Q3 2025 net income of $802,000. This is a positive trajectory, but the Q3 net income did drop significantly from Q2, which is something to monitor closely.

The Net Interest Margin (NIM), which measures the difference between interest earned and interest paid, has been consistently improving for five consecutive quarters, reaching 2.91% in Q3 2025. This is a good sign of balance sheet management in a high-rate environment, driven partly by a decrease in the rate paid on interest-bearing liabilities.

However, the operational efficiency story is mixed. The efficiency ratio-which measures noninterest expense as a percentage of net revenue-improved dramatically from a poor 113.5% in Q1 2025 to a much better 78.0% in Q2 2025. But, in Q3 2025, it jumped back up to an alarming 104.9%. This spike was primarily due to a rise in noninterest expense to $17.4 million in Q3 2025, up $4.6 million from the preceding quarter. This suggests cost management is inconsistent, which directly compresses that thin operating profit margin.

Industry Comparison: A Clear Gap

When you stack First Northwest Bancorp's (FNWB) performance against the regional banking industry, the need for continued operational improvement becomes clear. The industry's average Net Interest Margin (NIM) for Q2 2025 was around 3.26%, while FNWB's Q3 2025 NIM was 2.91%. This 35 basis point gap means the bank is generating less core interest profit on its assets than its peers.

The margin comparison is stark:

The efficiency ratio of 104.9% is the most critical number here. A ratio over 100% means the bank spent more on noninterest expenses (like salaries, rent, and technology) than it generated in net revenue. For context, top-performing regional banks aim for an efficiency ratio below 60%, and a competitor like Peoples Bancorp reported 59.3% in Q2 2025. The high ratio at FNWB points to a significant cost structure issue that is burning through the potential profit from its improving NIM, making its Net Profit Margin of 2.67% look tiny in comparison to the industry average of nearly 25%.

If you want to understand who is still investing in this turnaround story, you should read Exploring First Northwest Bancorp (FNWB) Investor Profile: Who's Buying and Why?

Next Step: Finance should immediately draft a 13-week cash view focusing on the Q3 2025 noninterest expense spike to identify the specific, non-recurring versus structural cost drivers.

Debt vs. Equity Structure

You're looking at First Northwest Bancorp (FNWB) and, like any seasoned investor, the first thing you want to know is how they're funding the business. Are they leaning too heavily on borrowed money, or are they relying on shareholder capital? The simple answer is that First Northwest Bancorp is currently running a much higher debt load than its regional bank peers, but they're actively working to bring that leverage down.

The core measure here is the Debt-to-Equity (D/E) ratio (a measure of a company's financial leverage, showing how much debt is used to finance assets relative to the value of shareholder equity). For the trailing twelve months (TTM) ending Q3 2025, First Northwest Bancorp's D/E ratio stood at about 1.78. Here's the quick math: this means for every dollar of shareholder equity, the company has $1.78 in debt financing. Now, compare that to the industry standard for US Regional Banks, which averages around 0.5 as of November 2025. That difference is defintely significant. It tells you the company is highly leveraged relative to its peer group.

The good news is that management is making tangible moves to rebalance this. In the first quarter of 2025, First Northwest Bancorp executed a smart piece of financial engineering, recording an $846,000 gain on extinguishment of debt by repurchasing $5.0 million of subordinated debt at a discount. Also, a more recent Q3 2025 move showed a reduction in 'Advances'-a form of short-term borrowing-by a substantial $84.5 million, bringing the total 'Advances' down to $225.0 million at the end of September 2025. This reduction directly contributed to an improved net interest margin, which is a clear win for profitability.

When it comes to balancing debt versus equity, the company is using a two-pronged strategy: reducing debt and conserving equity. While they are managing debt down, they are also being prudent with shareholder capital. The Board of Directors elected not to declare a dividend for the third quarter of 2025, a move specifically cited as part of a prudent approach to capital management. This decision keeps cash inside the company, bolstering the equity base and strengthening the capital ratios for the long term. This is a clear signal that capital preservation is a top priority right now.

The last publicly affirmed credit rating for First Northwest Bancorp's senior unsecured debt was BBB with a Stable Outlook, affirmed by KBRA in March 2023. While not a 2025 rating, the stable outlook is important context. The bank's debt structure, which includes both long-term and short-term liabilities, is under active management, with a clear focus on shedding expensive funding sources like brokered deposits and certain borrowings. You can dive deeper into who is holding this equity and why in Exploring First Northwest Bancorp (FNWB) Investor Profile: Who's Buying and Why?

• D/E Ratio (TTM Q3 2025): 1.78 (Industry Avg: 0.5).
• Q3 2025 Advances (Debt) Reduction: $84.5 million.
• Q1 2025 Debt Extinguishment Gain: $846,000.

Liquidity and Solvency

You're looking at First Northwest Bancorp (FNWB)'s ability to cover its near-term obligations, and honestly, the picture is one of tight but managed liquidity. For a financial institution, the standard liquidity ratios are less about inventory and more about immediate cash and marketable securities versus short-term debt. FNWB's ratios are sitting right on the line, which means every dollar of current assets is matched by a dollar of current liabilities.

As of late 2025, the company's Current Ratio and Quick Ratio are both at 1.01. This is a defintely a precise, not a comfortable, position. A ratio of 1.0 means the company has exactly enough liquid assets to cover its current liabilities (debts due within a year). Anything below 1.0 signals a potential problem, but FNWB is just above that threshold. It's adequate, but it doesn't leave much room for error or unexpected market shocks.

Working Capital and Cash Flow Dynamics

The working capital trend tells a more nuanced story. The Net Current Asset Value (a conservative measure of working capital) for the trailing twelve months (TTM) is a negative $-42.56 million. This negative figure is partly a function of how banks structure their balance sheets, where customer deposits are a current liability, but it does highlight the reliance on those deposits and other short-term funding sources. For a more granular view, the Net-Net Working Capital for the second quarter of 2025 was $-184.57 million.

Looking at the Cash Flow Statement for the 2025 fiscal year, the key takeaway is capital conservation. The Free Cash Flow for the third quarter of 2025 was effectively $0.00. Operating Cash Flow for the fiscal year was also near zero, reported at $> -0.01. This near-zero cash generation from core operations puts pressure on financing decisions. Here's the quick math on their financing moves:

• Operating Cash Flow: Near neutral for the fiscal year, meaning core banking activities are not generating significant excess cash for expansion or debt paydown right now.
• Financing Cash Flow: In Q1 2025, the company declared a quarterly cash dividend of $0.07 per common share. But, for Q3 2025, the Board elected not to declare a dividend. This is a clear, prudent action to conserve capital and strengthen the balance sheet, a move I respect.
• Investing Cash Flow: The company did recognize a $315,000 gain in Q1 2025 from converting a commercial loan into an equity investment, a small but positive signal of strategic asset management.

Near-Term Liquidity Strengths and Concerns

The core strength is the capital base, with First Fed's risk-based capital ratios improving to 13.7% in Q3 2025, up from 13.1% in Q2 2025. This is a strong buffer against unexpected losses. However, the tight liquidity ratios and the negative working capital position mean there are still 'liquidity concerns' that need to be addressed, as noted by analysts in Q1 2025. The decision to halt the dividend is a direct response to this pressure, prioritizing balance sheet strength over shareholder payout in the near term. You can read more about their long-term focus here: Mission Statement, Vision, & Core Values of First Northwest Bancorp (FNWB).

The table below summarizes the critical liquidity metrics for a fast comparison:

The action for you is to monitor Q4 2025 results closely for any further improvement in the capital ratios and a return to positive, sustained operating cash flow. That's the real signal of a financial turn.

Valuation Analysis

Looking at the core metrics from the 2025 fiscal year, First Northwest Bancorp (FNWB) appears undervalued on a Price-to-Book (P/B) basis compared to the broader US Banks industry, but its Price-to-Earnings (P/E) ratio suggests a more mixed picture, reflecting recent earnings misses.

You need to see if the market is punishing the stock too much for near-term headwinds, or if the low valuation is a fair reflection of the bank's profitability challenges. Honestly, the P/B ratio is the most compelling argument for a deep value play right now.

Key Valuation Ratios (2025 Fiscal Year)

When we break down the valuation, the first thing that jumps out is the Price-to-Book (P/B) ratio, which is critical for banks because it compares the stock price to the company's net asset value (Book Value). The P/B for First Northwest Bancorp sits at approximately 0.5x. This is a significant discount, especially when the US Banks industry average is closer to 1.0x, suggesting the stock is defintely trading below its tangible value.

The Price-to-Earnings (P/E) ratio tells a different story. The trailing P/E is high at 26.67, which usually signals an expensive stock, but that number is skewed by the bank's recent earnings miss. The forward P/E, based on analysts' 2026 earnings estimates, drops to a more reasonable 19.20. This drop implies an expected earnings recovery, so you're buying into that future growth.

As for Enterprise Value-to-EBITDA (EV/EBITDA), a metric we often use for non-financial companies, it's not a reliable tool here. Banks don't have a traditional EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) structure, so you'll often see it listed as 'N/A.'

Here's the quick math on the core ratios:

Stock Performance and Income for Investors

The stock's performance over the last 12 months has been challenging, with the price decreasing by 12.08%. This is a clear risk. Still, the stock has shown volatility, hitting a 52-week low of $6.05 in June 2025 and a 52-week high of $12.10 in February 2025. Trading near $9.25 now, it's closer to the low than the high.

For income-focused investors, First Northwest Bancorp pays an annualized dividend of $0.28 per share, which translates to a current dividend yield of about 3.08%. This yield is actually higher than the Financial Services sector average. The payout ratio-which shows how much of the earnings goes to dividends-is approximately 56% (based on the expected 2025 EPS of $0.50), which is sustainable and leaves room for reinvestment.

Analyst Consensus and Price Target

The consensus from the five analysts covering First Northwest Bancorp is a 'Hold' rating. This split view is important; two analysts rate it a Buy, one a Hold, and two a Sell. What this estimate hides is the wide range of opinions on the bank's future, but the average 1-year price target is around $13.50 per share. That target suggests a substantial upside from the current price, which is why some investors see an opportunity here.

• Average 1-Year Price Target: $13.50
• Consensus Rating: Hold
• Implied Upside: Over 40% from the recent closing price

For a deeper dive into the bank's operational health, you can check out our full report at Breaking Down First Northwest Bancorp (FNWB) Financial Health: Key Insights for Investors.

Risk Factors

You're looking at First Northwest Bancorp (FNWB) and seeing a regional bank with a solid Pacific Northwest footprint, but honestly, you have to look past the branch count to the specific risks that hit the balance sheet in 2025. The core takeaway is this: FNWB is navigating a significant legal challenge and a major operational cleanup, which is why the board is taking a very conservative stance on capital.

Financial and Legal Headwinds

The most immediate and material risk is the $106,925,000 lawsuit filed against its subsidiary, First Fed Bank, in June 2025. This case alleges the bank was complicit in a fraudulent scheme by a borrower, Water Station Management, LLC. To be fair, First Northwest Bancorp has categorically denied the allegations and plans a vigorous defense. Still, the financial exposure is massive, especially when compared to the company's market capitalization.

Here's the quick math on the legal fallout and credit risk:

• The company already recorded $7.7 million in net charge-offs for loans connected to the alleged fraud, showing the direct credit impact.
• Nonperforming loans dropped to $13.4 million at September 30, 2025, from $20.4 million in the prior quarter, partly due to the sale of a commercial construction loan, which is a positive action.
• As a prudent approach to capital management amid this uncertainty, the Board elected not to declare a dividend for the third quarter of 2025.

A legal battle of this size is a major drain on resources and management time, even if they defintely win.

Operational and Strategic Risks

The company has been dealing with significant internal disruption, which is a classic operational risk. The CEO resigned in July 2025, and while a permanent replacement, Curt Queyrouze, was appointed in September 2025 with a base salary of $550,000, the transition cost is notable.

The third quarter 2025 noninterest expense of $17.4 million included $1.1 million in nonrecurring costs related to this executive management transition and search fees. Plus, a more serious operational risk emerged in late 2024 with the disclosure of a material weakness in the Company's internal control over financial reporting as of June 30, 2024. This kind of control issue is a red flag for regulators and investors; it suggests core financial reporting processes need a serious overhaul.

External Market and Regulatory Pressures

Like all regional banks, First Northwest Bancorp faces external risks tied to the economic environment and a shifting regulatory landscape.

• Economic Uncertainty: While the Net Interest Margin (NIM) improved to 2.91% in Q3 2025, interest rate volatility and potential downturns in the Pacific Northwest economy could still strain loan performance.
• Regulatory Shift: 2025 is the 'Year of Regulatory Shift,' with federal agencies focusing on new areas. For a bank, this means continuous compliance pressure around things like the Community Reinvestment Act (CRA) and new guidance on financial crime and payments fraud.
• Cybersecurity: This is a top-tier operational risk for all financial institutions in 2025, with new technologies like Artificial Intelligence (AI) increasing the sophistication of cyberattacks, requiring constant, costly investment in defense.

The reduction in wholesale borrowings, with advances dropping $84.5 million to $225.0 million in Q3 2025, is a clear, positive action to mitigate liquidity risk in a tight credit market. To get the full picture, you should read our full analysis: Breaking Down First Northwest Bancorp (FNWB) Financial Health: Key Insights for Investors.

Growth Opportunities

You're looking at First Northwest Bancorp (FNWB) and wondering if the recent profitability turnaround is a blip or a real trend. Honestly, it looks like a deliberate pivot, driven by a focus on core banking and cleaning up the balance sheet. They are defintely positioning for a stronger 2026, but the 2025 numbers show the groundwork being laid.

The core of their future growth isn't a flashy new product, but a return to fundamental strength: better asset quality and disciplined expense management. In the first three quarters of 2025, the company made significant strides, including a reduction in nonperforming loans to $13.4 million by the end of Q3 2025, a sharp drop from $20.4 million just one quarter earlier. That's a huge improvement in risk profile. Plus, the net interest margin (NIM), which is how banks make money, improved for five consecutive quarters, hitting 2.91% in Q3 2025. That's a clean, positive trend.

Here's the quick math on projections: Analysts are pegging the projected annual revenue for the 2025 fiscal year at a substantial $102 million, which implies a massive increase of nearly 70% over the previous year's annual revenue. For earnings, the non-GAAP earnings per share (EPS) forecast is aggressive at $2.96 for 2025, though the actual Q3 2025 EPS was a more modest $0.09. What this estimate hides is the impact of non-recurring costs, like the $1.1 million for executive management transition recorded in Q3 2025.

The strategic initiatives are clear actions, not just talk:

• Expense Discipline: Consolidating the Bellevue and Fremont business centers into a new Seattle center, which is expected to reduce annual rent expenses by $130,000.
• Capital Management: Investing $9.1 million into a new bank-owned life insurance policy.
• Leadership Change: Naming Curt Queyrouze as CEO and President in September 2025 signals a commitment to a modern, forward-thinking financial institution.
• Fintech Exposure: Maintaining a focus on strategic partnerships for modern financial services like digital payments and marketplace lending, building on their 2022 investment in Meriwether Group.

Their key competitive advantage is their long-standing presence in the Pacific Northwest (PNW) since 1923, which provides a deep, stable customer base for their subsidiary, First Fed Bank. They are explicitly focused on core commercial and consumer customer growth. This local focus is their moat (a sustainable competitive advantage). Also, their risk-based capital ratio improved to a strong 13.7% in Q3 2025, which gives them a lot of flexibility to pursue growth without undue risk.

To be fair, the market is tough, but FNWB's strategy is about controlling what they can: expenses and credit quality. You can dive deeper into the full picture of their financial standing in Breaking Down First Northwest Bancorp (FNWB) Financial Health: Key Insights for Investors.

Here is a snapshot of the 2025 performance and projections:

The next step is to watch the Q4 2025 earnings report for confirmation that the new CEO is accelerating the core growth and expense discipline. That will tell us if the $2.96 EPS projection is defintely achievable.