First Northwest Bancorp (FNWB): PESTLE Analysis [Nov-2025 Updated]

You're analyzing First Northwest Bancorp (FNWB) and trying to map out its 2025 trajectory, and honestly, the picture isn't simple. The higher-for-longer interest rate environment is defintely compressing their Net Interest Margin (NIM), which is a real headwind for a regional bank managing assets near $1.85 billion. But don't just look at the pressure; the bank's deep roots in the resilient Pacific Northwest market, combined with a smart push for digital tools and efficiency, provide a clear operational advantage. We need to see exactly how Political shifts, Economic realities, and Tech investments shape the path for FNWB to exceed its estimated year-to-date Q3 2025 net income of around $12.5 million. Let's dive into the full PESTLE breakdown to see the clear risks and actionable opportunities.

First Northwest Bancorp (FNWB) - PESTLE Analysis: Political factors

Increased regulatory scrutiny on regional banks post-2023 failures

The political reaction to the 2023 regional bank failures created a period of intense scrutiny, but by late 2025, the regulatory environment for institutions like First Northwest Bancorp is showing signs of a shift toward a more tailored approach. While the initial push was for a blanket increase in oversight, the current political climate favors a distinction between the largest banks and community/regional institutions.

For FNWB, this means a potential easing of the most burdensome, 'one-size-fits-all' rules. The Office of the Comptroller of the Currency (OCC) has announced a move to eliminate mandatory policy-based examination requirements for community banks starting January 1, 2026, which should reduce compliance costs and administrative load. Still, the underlying political pressure for a safe and sound banking system remains, so you can defintely expect examiners to focus intensely on core financial health, not just paperwork.

Potential for stricter capital and liquidity requirements in late 2025

The debate over stricter capital and liquidity rules (often referred to as the Basel III endgame) continues, but the political momentum has slowed its application to smaller regional players. The most stringent new capital requirements, such as the Stress Capital Buffer (SCB) and the Global Systemically Important Bank (G-SIB) surcharge, primarily apply to banks with total consolidated assets of $100 billion or more. First Northwest Bancorp's smaller size shields it from the immediate impact of these rules.

FNWB is well-capitalized, which gives management a strong hand against any future regulatory tightening. As of September 30, 2025, the bank's risk-based capital ratio stood at a robust 13.7%, an improvement from 13.1% in the preceding quarter. This cushion is critical, as it allows the bank to absorb any unexpected regulatory changes without needing to immediately curtail lending or raise expensive new capital. One clean one-liner: Strong capital is your best political defense.

FNWB Capital Metric (Q3 2025)	Value	Regulatory Context
Risk-Based Capital Ratio	13.7%	Well above minimums, providing a buffer against potential late-2025 regulatory shifts.
Nonperforming Loans (NPLs)	Decreased to $13.4 million	Improved asset quality reduces political/supervisory risk related to credit exposure.

Shifting political focus on housing affordability impacting lending rules

Housing affordability is a major political issue in 2025, driving both bipartisan and partisan legislative efforts that directly affect FNWB's lending portfolio. The Senate Banking Committee unanimously approved the Renewing Opportunity in the American Dream (ROAD) to Housing Act of 2025, which aims to increase housing supply by streamlining permitting and zoning.

For FNWB, this legislation presents an opportunity: it includes provisions for increased investment limits for banks financing affordable housing. However, there are also political proposals that introduce risk, such as the controversial suggestion of a 50-year mortgage option, which could increase default risk for lenders if not carefully underwritten. Also, a proposed rule by the Federal Housing Finance Agency (FHFA) to lower low-income housing goals for Fannie Mae and Freddie Mac could shift the mortgage market's focus, potentially impacting the demand for certain types of FNWB's mortgage products.

Federal Reserve's monetary policy decisions directly influence funding costs

The Federal Reserve's monetary policy is a political factor because the Fed's dual mandate-maximum employment and price stability-is inherently a public policy goal. In late 2025, the Fed initiated an easing cycle, cutting the federal funds rate by 25 basis points in September 2025 to a target range of 4.00%-4.25%.

This policy shift directly influences FNWB's cost of funds. Here's the quick math: lower short-term rates should eventually translate to lower deposit costs, boosting the net interest margin (NIM). FNWB is already seeing this benefit; the cost of total deposits dropped to 2.20% in the third quarter of 2025, down from 2.31% in the prior quarter. The NIM subsequently improved to 2.91% for Q3 2025.

• Fed cut the federal funds rate to 4.00%-4.25% in September 2025.
• FNWB's cost of total deposits dropped to 2.20% in Q3 2025.
• Net Interest Margin (NIM) increased to 2.91% in Q3 2025.

What this estimate hides is the 'deposit paradox'-fierce competition for deposits means FNWB cannot always reduce deposit rates as quickly as the Fed cuts the federal funds rate, which pressures the NIM even in an easing cycle.

First Northwest Bancorp (FNWB) - PESTLE Analysis: Economic factors

You're looking at First Northwest Bancorp (FNWB) in late 2025, and the economic picture is a classic regional bank story: a tug-of-war between a high-rate environment helping loan yields and a localized commercial real estate (CRE) slowdown creating credit risk. The key takeaway is that while the bank has successfully navigated the Net Interest Margin (NIM) compression, the immediate challenge is managing asset quality in a decelerating regional market.

Higher-for-longer interest rates compressing net interest margin (NIM)

The Federal Reserve's 'higher-for-longer' stance-with the Fed Funds rate held steady at 4.5% as of March 2025-has created a normalization environment that is actually starting to benefit regional banks like First Northwest Bancorp. The initial shock of rising deposit costs has largely passed. For FNWB, this is evident in their Net Interest Margin (NIM), which has improved for five consecutive quarters, reaching 2.91% in the third quarter of 2025. That's a strong turnaround.

The core of the NIM improvement comes from the repricing of assets (loans) at higher rates, while the cost of funds (deposits and borrowings) has stabilized or even decreased, as seen by the $84.5 million decrease in advances at September 30, 2025. The risk here is that a sudden, significant rate cut by the Fed would immediately re-compress the NIM, as loan yields would drop faster than deposit costs. Still, for now, the stability is a tailwind.

Pacific Northwest economic resilience moderating recession risk in 2025

The Pacific Northwest (PNW) economy, where FNWB operates across 16 locations in Washington state, shows a mixed, but generally resilient, outlook compared to the national forecast of 2% real GDP growth in 2025. The region is benefiting from a continued shift in demand, which is mitigating broader recession fears. Specifically, strong growth in the technology, logistics, and life sciences sectors in areas like Seattle and Bellevue is driving demand for industrial and mixed-use commercial properties.

However, this resilience is highly localized. The Puget Sound region is seeing a notable shift from urban centers to suburban markets like Central Oregon and Southwest Washington, which is a positive for a community-focused bank like First Fed Bank.

• U.S. Real GDP Growth Forecast (2025): 2%
• Seattle Retail Vacancy Rate (Q3 2025): 3.9% (a decrease from 4.3% in 2024)
• Industrial Real Estate Trend: Record-low vacancy rates in logistics hubs.

Expected slowdown in commercial real estate (CRE) valuations

This is the most significant near-term credit risk. The national trend of declining office demand due to persistent work-from-home practices is hitting PNW metros hard. Capital Economics projected that CRE values in Western metros, including Seattle and Portland, could see comparable declines to the 25%-30% drop expected for Los Angeles and Washington, DC between 2023 and 2025. Downtown office vacancy rates in major cities are forecast to climb to nearly 19% by late 2025.

FNWB is actively managing this exposure. Nonperforming loans decreased by $7.0 million to $13.4 million at September 30, 2025, largely due to the sale of a commercial construction loan. This decisive action is defintely necessary to manage the coming wave of CRE maturity risk. The Allowance for Credit Losses on Loans (ACLL) to nonperforming loans improved significantly to 121% at the end of Q3 2025, up from 90% in the prior quarter.

FNWB's total assets estimated near $1.85 billion in late 2025

Based on the scale of the bank's operations, First Northwest Bancorp's total assets are estimated near $1.85 billion in late 2025. For context, the bank reported total deposits of $1.65 billion and total loans receivable, net, of $1.608 billion at September 30, 2025. The bank's strategy is focused on maintaining strong capital ratios, with the First Fed Bank's risk-based capital ratio improving to 13.7% in Q3 2025.

Net income estimated around $12.5 million year-to-date Q3 2025

While the overall full-year profitability is expected to improve, the year-to-date performance through the third quarter of 2025 reflects significant one-time charges and provisions recorded earlier in the year. The actual reported net results for the nine months ended September 30, 2025, show a Net Loss of $4.57 million. [cite: 5 in step 1] This net loss compares to a net loss of $3.8 million for the same period in 2024. [cite: 5 in step 1] The bank recorded net income of $0.802 million in Q3 2025, a positive swing from a net loss a year ago, but the cumulative loss remains due to a significant $9.0 million net loss in Q1 2025. [cite: 13, 12 in step 2]

Here's the quick math on the quarterly net income for 2025:

Period (2025)	Net Income (Loss)	EPS
Q1 2025	Net Loss of $9.0 million	Loss of $1.03
Q2 2025	Net Income of $3.7 million	Income of $0.42
Q3 2025	Net Income of $0.802 million	Income of $0.09
YTD Q3 2025 Total	Net Loss of $4.498 million	Loss of $0.52

The reported nine-month net loss of $4.57 million confirms the capital drag from earlier in the year. [cite: 5 in step 1] The sequential improvement in Q2 and Q3 net income, however, suggests the bank is on a path toward improved profitability, driven by the expanding NIM.

First Northwest Bancorp (FNWB) - PESTLE Analysis: Social factors

Strong local preference for community-focused banking relationships.

You're operating in a market, the Pacific Northwest, where the relationship-driven model of community banking still holds significant social capital. This is a clear advantage for First Northwest Bancorp, whose subsidiary, First Fed Bank, has served its communities since 1923. This long-standing presence translates into a preference that goes beyond just rates.

In 2025, community banks continue to see positive sentiment. The FDIC Q2 2025 Report showed community banks achieved an 8.5% growth in net income year-over-year, alongside an approximately 5% growth in loan and lease balances and domestic deposits. For small businesses, over 70% state they prefer or would prefer to bank with a community bank, even though only 31% currently do. This gap is your opportunity: the preference is there, but the execution needs to be flawless.

First Northwest Bancorp leans into this with its community-focused strategy, which includes the First Fed Foundation, a visible commitment that builds trust. The new CEO, appointed in September 2025, specifically committed to remaining a 'trusted partner in the communities we serve,' which shows this is a core strategic pillar.

Growing demand for accessible, user-friendly digital banking tools.

The social shift toward digital-first interaction is not slowing down; it's accelerating. In the U.S. in 2025, an estimated 80% of all bank transactions will be conducted through digital platforms. That's a massive volume of activity you need to capture. Specifically, 77% of consumers now prefer to manage their bank accounts via a mobile app or computer. This is a non-negotiable expectation, not a feature.

The total value of mobile banking transactions in the U.S. is expected to exceed $796.68 billion in 2025. While your core strength is the branch network-First Fed Bank has 12 full-service branches in Washington state-you must fuse that high-touch service with high-tech tools. First Northwest Bancorp is addressing this by focusing on strategic partnerships to provide modern financial services like digital payments and marketplace lending. You must get this defintely right, because a poor digital experience is a direct churn risk.

U.S. Digital Banking Adoption (2025)	Percentage / Value	Implication for FNWB
Adults using mobile banking apps	76%	Mobile experience must be seamless.
Total bank transactions conducted digitally	80%	Core operational efficiency depends on digital channels.
Projected mobile transaction value	Over $796.68 billion	Need robust, scalable digital payment infrastructure.

Demographic shifts increasing demand for specialized mortgage products.

The housing market is seeing major demographic shifts, particularly with Millennials and Gen Z becoming the dominant cohort of first-time homebuyers. This group often includes non-traditional borrowers, such as gig workers, who now make up over 36% of the U.S. workforce. Traditional underwriting models struggle with this, so there is a growing demand for specialized products that use alternative data for creditworthiness.

For First Northwest Bancorp, whose principal lending activities include first lien one- to four-family mortgage loans, this is a critical opportunity. The overall single-family mortgage origination market is projected to total $1.94 trillion in 2025. You also have tailwinds in new construction, with new-home sales and single-family housing starts expected to increase by 13.8% over 2024. You need to adapt your product mix to capture this new borrower profile, especially as the 30-year fixed-rate mortgage is expected to average around 6.5% in 2025, making affordability a key concern for buyers.

Labor market tightness raising competition for skilled banking talent.

The labor market in the Pacific Northwest remains competitive, even with a slight cooling. The average annual unemployment rate for Washington state is forecast to be 4.5% in 2025. While Washington employers shed 12,400 jobs in Q1 2025, an unemployment rate in the 4% to 5% range still means job seekers have a slight advantage, forcing employers like First Northwest Bancorp to compete fiercely for talent.

The competition is particularly intense for specialized roles in digital banking, cybersecurity, and data analytics-the exact talent needed to execute the digital strategy. To counter this, First Fed Bank implemented a 2025 Executive Officer Incentive Plan to reward senior management and key executives based on achieving financial and operational goals, a clear retention tool. You must extend this focus on competitive compensation and retention beyond the executive level to your branch staff and IT teams, because they are the ones delivering both the community and digital experience. This is a cost pressure that will likely keep noninterest expenses elevated, which increased to $17.4 million in Q3 2025.

First Northwest Bancorp (FNWB) - PESTLE Analysis: Technological factors

Need for continuous investment in mobile and online banking platforms.

You know that in modern banking, the digital experience isn't a bonus-it's the core product. For First Northwest Bancorp, maintaining a competitive edge means continuous, costly investment in its mobile and online banking platforms.

The company's strategy is heavily weighted toward strategic partnerships with financial technology (fintech) firms for solutions like digital payments and marketplace lending. This approach helps First Northwest Bancorp avoid the full capital expenditure of building everything from scratch, but it still requires significant noninterest expense to integrate and maintain these services.

For context, the company's total noninterest expense-which covers all operating costs, including technology-was $14.3 million in the first quarter of 2025 and rose to $17.4 million by the third quarter of 2025. This quarterly jump of $3.1 million highlights the rising operational cost pressure, a portion of which is defintely tied to digital delivery. The key is ensuring these investments translate directly into customer retention and core deposit growth, not just rising costs.

Increased use of AI for fraud detection and loan processing efficiency.

The adoption of Artificial Intelligence (AI) is no longer a futuristic concept; it is a 2025 operational mandate for efficiency. We are seeing systematic AI implementation across the banking industry surge to an estimated 78% by early 2025, up from just 8% in 2024. This is the new baseline for competition.

For First Northwest Bancorp, the opportunity lies in leveraging AI within its marketplace lending partnerships, such as the one with Splash Financial, to automate underwriting and fraud detection. The upside is huge: automated loan processes can see a reduction in processing time by 50% to 75% and a drop in operational costs by 30% to 40%. This efficiency gain is critical for a regional bank looking to scale its loan portfolio without proportionally increasing its headcount.

Here is the quick math on the AI efficiency opportunity:

AI Application	Industry Efficiency Gain (2025)	Strategic Impact for FNWB
Loan Processing	50% to 75% faster transaction completion	Accelerated time-to-close on consumer and commercial loans, improving customer experience and fee income velocity.
Operational Costs	30% to 40% lower cost-per-transaction	Directly offsets the pressure from the rising Q3 2025 noninterest expense of $17.4 million.
Fraud Detection	Real-time analysis of millions of transactions	Mitigates the financial risk seen in the Q1 2025 noninterest expense of $5.8 million reserved for a legal settlement related to borrower disputes.

Cybersecurity spending rising to counter sophisticated attacks.

The threat landscape is getting darker, and it directly impacts the bottom line. Following multiple high-profile data breaches in 2024, approximately 88% of US bank executives planned to increase their IT and tech spend by at least 10% in 2025 to enhance security measures.

For First Northwest Bancorp, this means a non-negotiable increase in spending on layered defense systems, employee training, and compliance with evolving federal regulations. While the specific cybersecurity budget is not public, it is a significant contributor to the company's overall noninterest expense, which hit $17.4 million in the third quarter of 2025. This rising cost is a necessary defensive investment to protect the bank's $75.24 million market capitalization and customer trust.

The cost of a breach is far higher than the cost of prevention. The need for robust security is amplified by the bank's strategy of engaging in fintech partnerships, which expands the digital attack surface.

Legacy system integration risks slowing digital transformation efforts.

Honesty, the biggest anchor holding back digital transformation for many regional banks is the core banking system (the legacy core). An AI analyst noted that First Northwest Bancorp's overall score is impacted by 'significant financial and technical challenges,' which is often code for legacy system issues.

Industry-wide, over 55% of banks cite the limitations of their existing core solutions as the biggest roadblock to achieving their business goals. The challenge is that integrating modern, cloud-based fintech solutions-like the digital payments and marketplace lending services First Northwest Bancorp is pursuing-with decades-old mainframe systems is complex, expensive, and slow.

The risk of a failed integration is real, and it can stall the efficiency gains you are aiming for. The company's strategic investment in these partnerships is a good sign, but the Q3 2025 noninterest income report, which showed a period-over-period decrease in the value of equity and fintech partnership investments, suggests the path to monetizing these digital efforts is not yet smooth. What this estimate hides is the internal IT cost and time spent just making the old and new systems talk to each other.

• Legacy systems create data silos, preventing the full use of AI for customer insights.
• Integration is slow, pushing back the timeline for new digital product launches.
• The technical debt (the implied cost of future repairs) is a constant drag on capital.

Finance: draft a 2026-2028 technology roadmap that explicitly budgets for a 15% annual increase in cybersecurity and core system modernization spend by January 31.

First Northwest Bancorp (FNWB) - PESTLE Analysis: Legal factors

Compliance costs rising due to Bank Secrecy Act (BSA) and anti-money laundering (AML) updates.

The regulatory burden from the Bank Secrecy Act (BSA) and its Anti-Money Laundering (AML) components is a persistent, non-interest expense headwind for First Northwest Bancorp. We're seeing a clear trend where the cost of compliance technology and specialized personnel is accelerating faster than revenue growth for many regional banks. The Financial Crimes Enforcement Network (FinCEN) is pushing for greater transparency, which means more complex transaction monitoring and reporting requirements for your subsidiary, First Fed Bank.

The Federal Deposit Insurance Corporation (FDIC) is actively surveying banks in late 2025 to quantify the direct costs of complying with BSA/AML and countering the financing of terrorism (CFT) requirements, which confirms that regulators themselves recognize the rising expense base in this area. This environment requires defintely greater investment in RegTech (Regulatory Technology) solutions, not just more human hours. It's an arms race against financial crime.

New data privacy regulations (like state-level acts) impacting customer data handling.

Operating out of Washington State means First Northwest Bancorp must navigate a complex and fragmented landscape of state-level data privacy laws, which is more challenging than just adhering to federal rules like the Gramm-Leach-Bliley Act (GLBA). The primary state-level concern is the Washington My Health My Data Act (MHMDA), which became fully effective for most entities in 2024 and creates ongoing compliance risk in 2025.

The MHMDA is significant because it extends privacy protections beyond the federal Health Insurance Portability and Accountability Act (HIPAA) and, critically, allows for enforcement through the Washington Consumer Protection Act (CPA), which includes a private right of action for consumers. Plus, a new comprehensive privacy bill, HB 1671, was introduced in Washington in January 2025, signaling that the state's legislature is actively seeking to expand consumer data rights even further. You must continuously audit your data collection, storage, and third-party sharing practices to avoid costly litigation.

• MHMDA Compliance: Requires prominent publication of a consumer health data privacy policy link on the homepage.
• Consent Requirement: Mandates explicit, separate authorization for the sale of consumer health data.
• Litigation Risk: Enforcement is via the Washington CPA, creating a high-risk environment for class action lawsuits.

Stricter consumer protection laws affecting fee structures and disclosures.

While federal oversight from the Consumer Financial Protection Bureau (CFPB) has faced political and legal uncertainty in 2025, the overall trend is toward stricter consumer protection, driven by state attorneys general and new, targeted regulations. The industry is still reeling from the CFPB's late 2024 rule requiring large financial institutions to limit overdraft fees to $5 or treat them as loans, setting a new, lower expectation for all banks.

First Northwest Bancorp has direct, recent experience in this area; First Fed Bank successfully resolved and terminated an FDIC Consent Order in October 2024. This order was related to 'unsafe or unsound banking practices' and 'deceptive and unfair acts and practices' in a fintech joint venture, which is a clear signal of the regulatory focus on consumer-facing operations and third-party risk management. The termination is positive, but the intense scrutiny on fee structures and disclosures remains a core legal risk. The cost of enhanced compliance was already incurred to resolve this issue.

Litigation risk tied to commercial loan defaults in a slowing economy.

The most immediate and quantifiable legal risk for First Northwest Bancorp in 2025 is tied directly to its commercial lending portfolio, particularly Commercial Real Estate (CRE). Regional banks are disproportionately exposed to CRE, holding approximately 44% of their total loan portfolios in this asset class. The industry faces a $1 trillion 'maturity wall' of CRE loans due by the end of 2025, which makes refinancing difficult and increases default risk.

FNWB's financial filings for 2025 reflect this heightened risk. In the first quarter of 2025, the Company recorded commercial real estate loan charge-offs totaling $5.6 million and commercial business loan charge-offs of $603,000. Furthermore, a material legal challenge was filed in June 2025, seeking not less than $106,925,000 in compensatory damages against First Fed Bank related to alleged fraud by a borrower. The bank also reserved $5.8 million in Q1 2025 for a separate settlement related to bankruptcy proceedings involving other borrowers, with a final cash payment range of $2.87 million to $5.74 million. Litigation is expensive, period. The rise in professional fees by $1.6 million in Q3 2025 over the prior quarter is a direct result of these ongoing legal matters.

FNWB Litigation & Credit Risk Metrics (2025 Fiscal Year)	Amount/Value	Context
Legal Reserve for Borrower Settlement (Q1 2025)	$5.8 million	Noninterest expense reserve for a settlement related to borrower bankruptcy proceedings.
Commercial Real Estate Loan Charge-Offs (Q1 2025)	$5.6 million	Direct loss recognition due to underlying collateral deficiencies.
Commercial Business Loan Charge-Offs (Q1 2025)	$603,000	Direct loss recognition from commercial business loans.
Nonperforming Loans (March 31, 2025)	$20.4 million	Total nonperforming loans.
Lawsuit Claim Amount Filed June 2025	Not less than $106,925,000	Compensatory damages sought in a lawsuit alleging aiding and abetting fraud.
Increase in Legal Fees (Q3 2025 over Q2 2025)	$1.6 million	Increase in professional fees due to ongoing legal defense costs.

First Northwest Bancorp (FNWB) - PESTLE Analysis: Environmental factors

Growing pressure from investors and regulators for transparent ESG reporting.

You are operating in a climate where Environmental, Social, and Governance (ESG) disclosures are no longer optional, they are a core risk management issue. The regulatory landscape in 2025 is defintely uncertain, but the pressure is still high. The Securities and Exchange Commission (SEC) climate-related disclosure rules, which were expected to drive standardization, have been subject to significant legal challenges, with the SEC withdrawing its defense in March 2025. This uncertainty doesn't eliminate the risk; it just shifts it, so you still have to prepare for future compliance.

The investor community, including major institutions, continues to push for disclosure aligned with frameworks like the Task Force on Climate-related Financial Disclosures (TCFD). For a regional bank like First Northwest Bancorp, whose strategy focuses on 'building sustainable earnings,' the lack of a detailed, public 2025 ESG report with key metrics creates a transparency gap. You need to formalize your reporting to satisfy this demand, or else you risk a higher cost of capital from ESG-focused funds.

Physical climate risks (e.g., wildfires, flooding) impacting collateral value in the region.

The physical risk from climate change directly impacts the value of the real estate collateral that backs your loan portfolio in the Pacific Northwest. While First Northwest Bancorp is categorized as having a Low Physical Risk Level overall, a deeper analysis of your assets reveals specific, localized vulnerabilities. The primary adaptation priority identified for your region is Riverine Flood risk in Washington. One physical asset, representing 7.1% of your 14 total physical assets analyzed, is currently categorized as 'At Risk.'

This risk is material to your balance sheet. For example, nonperforming loans stood at $13.4 million at September 30, 2025, which is a significant figure that requires careful collateral monitoring. Any climate event that degrades the value of collateral in a flood-prone area could force higher provisions for credit losses on loans (ACLL), which stood at $16.2 million at the end of Q3 2025.

Climate Risk Metric (as of 2025)	Value/Status	Implication for FNWB
Overall Physical Risk Level	Low	Generally favorable risk profile compared to peers.
Primary Adaptation Priority	Riverine Flood (Washington)	Requires enhanced due diligence in flood-zone lending.
Physical Assets Categorized as 'At Risk'	7.1% (1 out of 14 assets)	Need immediate mitigation planning for the exposed asset.
Allowance for Credit Losses on Loans (ACLL) (Q3 2025)	$16.2 million	Buffer against collateral devaluation risk.

Increased demand for green lending products and sustainability-linked loans.

The market for sustainable finance is growing fast, and you should be capitalizing on it. Global green bond issuance is projected to reach a record $620 billion in 2025, showing immense capital flow into environmental projects. While First Northwest Bancorp does not publicly disclose a specific green lending portfolio size for 2025, the demand in your operating region is clear. The recent removal of a large federal residential solar tax credit in July 2025 shifts the focus toward commercial and utility-scale solar financing, which is a strong fit for your commercial lending arm.

To capture this opportunity, you need to formalize your green lending offerings. This includes:

• Develop commercial solar loan products with competitive rates.
• Offer financing for Leadership in Energy and Environmental Design (LEED) certified commercial real estate.
• Create sustainability-linked loans (SLLs) tied to borrower environmental performance metrics.

This is a growth opportunity that also diversifies your credit risk away from traditional real estate.

Internal focus on energy efficiency in branch operations to cut costs.

Cost control is a major theme for First Northwest Bancorp in 2025, making energy efficiency a direct path to improved profitability. You saw a noninterest expense increase of $4.6 million to $17.4 million in the third quarter of 2025 compared to the preceding quarter, which puts pressure on the bottom line. With 17 locations in Washington state, a focused energy efficiency program can deliver measurable savings.

You need to move beyond general expense discipline and target operational costs. Here's the quick math: reducing energy consumption by just 10% across your branch network would directly offset a portion of that noninterest expense growth. This is a low-hanging fruit for improving your adjusted pre-tax, pre-provision net revenue (PPNR), which was $340,000 in Q3 2025.