First Northwest Bancorp Adjusts Asset Valuation
Ticker: FNWB · Form: 10-Q/A · Filed: Oct 25, 2024 · CIK: 1556727
Sentiment: neutral
Topics: amended-filing, valuation-adjustment, fdic-guidance, asset-management
TL;DR
FNWB moved assets to Level 3 valuation due to no market data. FDIC involved.
AI Summary
First Northwest Bancorp filed an amended 10-Q for the period ending June 30, 2024. The filing indicates a transfer of assets from Level 2 to Level 3 valuation due to a lack of observable market data. This adjustment was deemed necessary by the Bank, in conjunction with FDIC guidance, following a recent examination.
Why It Matters
This filing signals a shift in how First Northwest Bancorp values certain assets, potentially impacting reported financial health due to reduced market observability.
Risk Assessment
Risk Level: medium — The transfer to Level 3 valuation suggests increased uncertainty and subjectivity in asset pricing, which could indicate underlying financial risks.
Key Numbers
- 19,343 — Total Assets (As of June 30, 2024, reported in the 10-Q/A.)
- 17,510 — Total Liabilities (As of June 30, 2024, reported in the 10-Q/A.)
- 5,000,000 — Securities (Reported value in the filing.)
- 75,000,000 — Loans (Reported value in the filing.)
Key Players & Entities
- First Northwest Bancorp (company) — Filer of the 10-Q/A
- FDIC (company) — Provided guidance for asset valuation adjustments
FAQ
What specific assets were transferred from Level 2 to Level 3?
The filing states that 'investments' were transferred to Level 3 due to a lack of observable market data, but does not specify individual asset types beyond that general category.
What was the reason for the recent examination by the FDIC?
The filing mentions that the adjustments were made as a result of a 'recent examination' by the FDIC, but does not detail the specific findings or reasons for that examination.
What is the total dollar amount of assets transferred to Level 3?
The filing does not provide a specific dollar amount for the assets transferred from Level 2 to Level 3, only stating that the transfer occurred due to a lack of observable market data.
When did the transfer from Level 2 to Level 3 valuation occur?
The filing indicates the adjustments were posted as of and for the three and six months ended June 30, 2024, implying the transfer occurred within or prior to this period.
What is the implication of assets being classified as Level 3?
Level 3 classification means the assets are valued using unobservable inputs, indicating higher uncertainty and subjectivity in their valuation compared to Level 1 or Level 2 assets.
Filing Stats: 4,693 words · 19 min read · ~16 pages · Grade level 19.7 · Accepted 2024-10-25 17:18:28
Key Financial Figures
- $0.01 — h registered: Common Stock, par value $0.01 per share FNWB The Nasdaq Stock Mar
- $6.6 million — 024, in order to reflect an increase of $6.6 million in charge-offs across commercial constr
- $8.7 million — provision for credit losses on loans of $8.7 million. The increases are a result of manageme
Filing Documents
- fnwb20240630_10qa.htm (10-Q/A) — 5306KB
- ex_733690.htm (EX-31.1) — 13KB
- ex_733691.htm (EX-31.2) — 13KB
- ex_733692.htm (EX-32) — 7KB
- 0001437749-24-032158.txt ( ) — 22703KB
- fnwb-20240630.xsd (EX-101.SCH) — 92KB
- fnwb-20240630_cal.xml (EX-101.CAL) — 75KB
- fnwb-20240630_def.xml (EX-101.DEF) — 762KB
- fnwb-20240630_lab.xml (EX-101.LAB) — 608KB
- fnwb-20240630_pre.xml (EX-101.PRE) — 812KB
- fnwb20240630_10qa_htm.xml (XML) — 6205KB
- Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 45
- Quantitative and Qualitative Disclosures About Market Risk
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 64
- Controls and Procedures
Item 4 - Controls and Procedures 64
- OTHER INFORMATION
PART II - OTHER INFORMATION
- Legal Proceedings
Item 1 - Legal Proceedings 66
- Risk Factors
Item 1A - Risk Factors 66
- Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
Item 2 - Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities 66
- Defaults Upon Senior Securities
Item 3 - Defaults Upon Senior Securities 67
- Mine Safety Disclosures
Item 4 - Mine Safety Disclosures 67
- Other Information
Item 5 - Other Information 67
- Exhibits
Item 6 - Exhibits 67
SIGNATURES
SIGNATURES 68 As used in this report, "First Northwest" refers to First Northwest Bancorp and "First Fed" or the "Bank" refers to First Fed Bank, the wholly owned subsidiary of First Northwest. The terms "we," "our," "us," and "Company" refer to First Northwest together with First Fed, unless the context indicates otherwise. For periods prior to June 30, 2023, Company references also include Quin Ventures, Inc., a former First Northwest joint venture. 4 Table of Contents
- FINANCIAL INFORMATION
PART I - FINANCIAL INFORMATION
Financial Statements (Unaudited)
Item 1. Financial Statements (Unaudited) FIRST NORTHWEST BANCORP AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share information) (Unaudited) June 30, 2024 December 31, 2023 (Restated) ASSETS Cash and due from banks $ 19,184 $ 19,845 Interest-earning deposits in banks 63,995 103,324 Investment securities available for sale, at fair value 306,714 295,623 Loans held for sale 1,086 753 Loans receivable (net of allowance for credit losses on loans of $ 19,343 and $ 17,510 ) 1,677,764 1,642,518 Federal Home Loan Bank (FHLB) stock, at cost 13,086 13,664 Accrued interest receivable 9,466 7,894 Premises and equipment, net 10,714 18,049 Servicing rights on sold loans, at fair value 3,740 3,793 Bank-owned life insurance, net 41,113 40,578 Equity and partnership investments 15,085 14,794 Goodwill and other intangible assets, net 1,084 1,086 Deferred tax asset, net 12,216 13,001 Prepaid expenses and other assets 40,715 26,875 Total assets $ 2,215,962 $ 2,201,797 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits $ 1,708,288 $ 1,676,892 Borrowings 302,575 320,936 Accrued interest payable 3,143 3,396 Accrued expenses and other liabilities 41,771 35,973 Advances from borrowers for taxes and insurance 1,304 1,260 Total liabilities 2,057,081 2,038,457 Shareholders' Equity Preferred stock, $ 0.01 par value, authorized 5,000,000 shares, no shares issued or outstanding — — Common stock, $ 0.01 par value, authorized 75,000,000 shares; issued and outstanding 9,453,247 shares at June 30, 2024, and 9,611,876 shares at December 31, 2023 94 96 Additional paid-in capital 93,985 95,784 Retained earnings 103,322 107,349 Accumulated other comprehensive loss, net of tax ( 31,597 ) ( 32,636 ) Unearned employee stock ownership plan (ESOP) shares ( 6,923 ) ( 7,253 ) Total shareholders' equity 158,881 163,340 Total liabilities and shareholders' equity $ 2,215,962 $ 2,201,797 Se
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1 - Basis of Presentation and Critical Accounting Policies Organization and nature of business - First Northwest Bancorp, a Washington corporation ("First Northwest"), became the holding company of First Fed Bank ("First Fed" or the "Bank") on January 29, 2015, upon completion of the Bank's conversion from a mutual to stock form of organization (the "Conversion"). In connection with the Conversion, the Company issued an aggregate of 12,167,000 shares of common stock at an offering price of $ 10.00 per share for gross proceeds of $ 121.7 million. An additional 933,360 shares of Company common stock and $ 400,000 in cash were contributed to the First Federal Community Foundation ("Foundation"), a charitable foundation that was established in connection with the Conversion, resulting in the issuance of a total of 13,100,360 shares. The Company received $ 117.6 million in net proceeds from the stock offering of which $ 58.4 million was contributed to the Bank upon Conversion. Pursuant to the Bank's Plan of Conversion (the "Plan") adopted by its Board of Directors, and as approved by its members, the Company established an employee stock ownership plan ("ESOP"). On December 18, 2015, the ESOP completed its open market purchases, with funds borrowed from the Company, of 8 % of the common stock issued in the Conversion for a total of 1,048,029 shares. In April 2021, First Northwest entered into an Amended and Restated Joint Venture Agreement (the "Joint Venture Agreement") with the Bank, Peace of Mind, Inc. ("POM"), and Quin Ventures, Inc. ("Quin" or "Quin Ventures"). First Northwest extended $ 8.0 million to Quin Ventures under a capital financing agreement and related promissory note and issued 29,719 shares of the Company's common stock to POM with a value of $ 500,000 . Quin Ventures sold substantially all of its assets in December 2022 to Quil Ventures, Inc. ("Quil"), at which time POM returned the 29,