First Northwest Bancorp Reports Second Quarter 2023 Earnings

PORT ANGELES, Wash., July 27, 2023 (GLOBE NEWSWIRE) --

Matthew P. Deines, President and CEO, comments on financial results:
"We grew deposits this quarter and are cautiously optimistic that funding costs have begun to stabilize," said Matthew P. Deines, President and CEO of First Northwest Bancorp. "We continue to focus on the blocking and tackling of community banking and expect actions we took in the second quarter will result in lower expenses in future quarters. Loan growth continues to moderate as we focus on liquidity and pricing loans based on the marginal cost of deposits. Credit quality remains strong and continues to serve as a defining characteristic of our credit culture."

The Board of Directors of First Northwest Bancorp declared a quarterly cash dividend of $0.07 per common share. The dividend will be payable on August 25, 2023, to shareholders of record as of the close of business on August 11, 2023.

FINANCIAL HIGHLIGHTS		2Q 23				1Q 23				2Q 22				YTD Highlights
OPERATING RESULTS (in millions)														●	Deposit growth year-to-date of $88.9 million
Operating revenue (1)		$	17.7			$	18.6			$	19.5			–	Retail growth $43.1 million, or 3.0%
Noninterest expense			15.2				14.9				17.0			–	Brokered growth $45.7 million, or 34.2%
Pre-provision net interest income			16.0				16.3				17.2
Net income			1.8				3.5				2.5			●	Loan growth year-to-date of $90.6 million,
PER SHARE DATA															or 6%
Basic and diluted earnings		$	0.20			$	0.39			$	0.27
Book value			16.56				16.57				16.60			●	Deposit insurance coverage update:
Tangible book value *			16.39				16.38				16.40			–	Estimated uninsured business and
BALANCE SHEET (in millions)															consumer deposits totaling $271.5 million,
Total loans		$	1,638			$	1,579			$	1,477				or approximately 16% of total deposits
Total deposits			1,653				1,594				1,581				42% of uninsured in urban areas
Total shareholders' equity			160				160				165				58% of uninsured in rural areas
ASSET QUALITY														–	Estimated uninsured public fund deposits
Net charge-off ratio			0.10	%			0.25	%			-0.03	%			to total deposits of 8% (fully collateralized)
Nonperforming assets to total assets			0.12				0.12				0.06			–	Estimated insured deposits to total
Allowance for credit losses on loans															deposits of 76%
to total loans			1.06				1.10				1.07			–	Available borrowing capacity to
Nonperforming loan coverage ratio			677				661				1,269				uninsured deposits of 125%
SELECTED RATIOS
Return on average assets			0.34	%			0.70	%			0.51	%		●	Liquidity:
Return on average equity			4.41				8.98				5.75				Closely monitored with ample on and off
Return on average tangible equity *			4.47				9.08				5.82				balance sheet liquidity for operations.
Net interest margin			3.25				3.46				3.77
Efficiency ratio			86.01				79.78				87.15			●	Asset quality:
Bank common equity tier 1 (CETI) ratio			13.10				13.34				13.21				Credit metrics remain stable. Past due and
Bank total risk-based capital ratio			14.08				14.35				14.24				nonperforming balances remain low.

^{(1) Net interest income before provision plus noninterest income
* See reconciliation of Non-GAAP Financial Measures later in this release.}

First Northwest Bancorp (Nasdaq: FNWB) ("First Northwest" or "Company") today reported quarterly net income of $1.8 million for the second quarter of 2023, compared to $3.5 million for the first quarter of 2023, and $2.5 million for the second quarter of 2022. Basic and diluted earnings per share were $0.20 for the second quarter of 2023, compared to $0.39 for the first quarter of 2023, and $0.27 for the second quarter of 2022. In the second quarter of 2023, the Company generated a return on average assets ("ROAA") of 0.34%, a return on average equity ("ROAE") of 4.41%, and a return on average tangible common equity* of 4.47%. Results in the second quarter of 2023 are reflective of the higher interest rate environment and the impact on the deposit mix as customers seek higher yielding alternatives for their balances.

In June 2023, First Northwest determined that Quin Ventures, Inc. ("Quin Ventures") was no longer a going concern. The Company wrote off the remaining investment in Quin Ventures through retained earnings in accordance with applicable non-controlling interest accounting methods. The noncontrolling interest in Quin Ventures balance was moved to retained earnings, with no change to total shareholders' equity as a result of the transaction.

Net Interest Income
Total interest income increased $2.2 million to $25.5 million for the second quarter of 2023, compared to $23.3 million in the previous quarter, and increased $6.5 million from $19.0 million in the second quarter of 2022. Interest income increased in the current quarter due to higher yields on earning assets and increased volume of loans and interest-earning deposits in banks. Interest and fees on loans increased year-over-year, in part, as the Company's banking subsidiary, First Fed Bank ("First Fed" or "Bank"), grew the loan portfolio through our renewed short-term participation in the Northpointe Mortgage Purchase Program ("Northpointe MPP"), draws on new and existing business lines of credit, originations of multi-family real estate loans, and auto and manufactured home loan purchases. Loan yields have increased over the prior year due to higher rates on new originations as well as the repricing of variable rate loans tied to the Prime Rate or other indices.

Total interest expense was $9.5 million for the second quarter of 2023, compared to $7.0 million in the first quarter of 2023 and $1.7 million in the second quarter a year ago. Current quarter interest expense was higher due to a 42 basis point increase in the cost of deposits to 1.54% at June 30, 2023, from 1.12% at the prior quarter end. The increase over the second quarter of 2022 was the result of a 134 basis point increase in the cost of deposits from 0.20% one year prior along with higher volumes of short-term FHLB advances and certificates of deposit ("CDs"). A shift in the deposit mix from transaction and money market accounts to a higher volume of savings accounts and CDs, primarily promotional, resulted in higher costs of deposits. Reliance on brokered CDs to replace lost consumer balances also contributed to additional deposit costs.

Net interest income before provision for credit losses for the second quarter of 2023 decreased 2.0% to $16.0 million, compared to $16.3 million for the preceding quarter, and decreased 7.3% from the second quarter one year ago.

The Company recorded a $300,000 provision for credit losses in the second quarter of 2023, reflecting the growth in the loan portfolio and additional charge-offs from the Splash unsecured consumer loan program. This compares to a recapture of loan loss provision of $500,000 for the preceding quarter due to a decrease in unfunded commitments during the quarter as well as improvements in the U.S. gross domestic product assumption driving anticipated loss rates. A loan loss provision of $500,000 was recorded for the second quarter of 2022, which was estimated using the incurred loss method based on historical loss trends combined with qualitative adjustments.

The net interest margin decreased to 3.25% for the second quarter of 2023, from 3.46% the prior quarter, and decreased 52 basis points compared to the second quarter of 2022 of 3.77%. Decreases from both the prior quarter and the prior year are due to higher funding costs for both deposits and borrowed funds. While increases in the cost of funding are currently outpacing the growth of the yield on interest-earning assets, the Company has taken measures to combat interest rate compression. The Bank augments organic loan production with higher yielding purchased loans through relationships with loan originators. We have also increased our focus on variable-rate lending and the Bank has entered into a fair value hedging agreement.

The yield on average earning assets of 5.17% for the second quarter of 2023 increased 22 basis points compared to the first quarter of 2023, and increased 103 basis points from 4.14% for the second quarter of 2022. Higher loan rates at origination and increased yields on variable-rate loans were offset by a slight decline in the recognition of fees related to loan prepayments. The year-over-year increase was primarily due to higher average loan balances augmented by increases in yields, which were positively impacted by the rising rate environment and overall improvements in the mix of interest-earning assets.

The cost of average interest-bearing liabilities increased to 2.33% for the second quarter of 2023, compared to 1.81% for the first quarter of 2023, and increased from 0.49% for the second quarter of 2022. Total cost of funds increased to 1.98% for the second quarter of 2023 from 1.53% in the prior quarter and increased from 0.39% for the second quarter of 2022. Current quarter increases were due to higher costs on interest-bearing deposits and advances in addition to increases in average CD and advance balances.

The increase over the same quarter last year was driven by higher rates paid on deposits. The Company has attracted and retained funding through the use of promotional products. The mix of retail deposit balances has shifted away from non-maturity accounts towards higher cost term certificate and savings products. Retail CDs represented 25.8%, 22.8% and 12.3% of retail deposits at June 30, 2023, March 31, 2023 and June 30, 2022, respectively. Average interest-bearing deposit balances increased $45.5 million, or 3.5%, to $1.33 billion for the second quarter of 2023 compared to $1.29 billion for the first quarter of 2023 and increased $110.0 million, or 9.0%, compared to $1.22 billion for the second quarter of 2022.

Selected Yields		2Q 23				1Q 23				4Q 22				3Q 22				2Q 22
Loan yield			5.38	%			5.16	%			5.22	%			4.75	%			4.48	%
Investment securities yield			4.09				3.93				3.71				3.21				2.96
Cost of interest-bearing deposits			1.87				1.37				0.78				0.41				0.26
Cost of deposits			1.54				1.12				0.62				0.32				0.20
Cost of borrowed funds			4.36				3.92				3.30				2.50				1.96
Net interest spread			2.84				3.13				3.72				3.72				3.65
Net interest margin			3.25				3.46				3.96				3.88				3.77

Noninterest Income
Noninterest income declined 26.7% to $1.7 million for the second quarter of 2023 from $2.3 million for the first quarter of 2023 primarily due to a decline in the valuation of servicing rights on sold loans of $675,000 related to the impact of loan payoffs that increased the prepayment speed applied to the remaining servicing rights, as well as a current quarter reduction due to the paid-off loans, mainly attributable to one large commercial loan. Noninterest income declined 23.0% from $2.2 million the same quarter one year ago, due to decreases in the servicing rights valuation, gain on sale of mortgage loans and swap fee income. Saleable mortgage loan production continues to be hindered by reduced refinancing activity due to rising market rates on mortgage loans compared to the prior year.

Noninterest income declined $580,000 to $4.0 million for the six months ended June 30, 2023, compared to $4.6 million for the six months ended June 30, 2022.

Noninterest Income
$ in thousands		2Q 23				1Q 23				4Q 22				3Q 22				2Q 22
Loan and deposit service fees		$	1,064			$	1,141			$	1,163				1,302			$	1,091
Sold loan servicing fees and servicing right mark-to-market			(191	)			493				202				206				27
Net gain on sale of loans			58				176				55				285				231
Net gain on sale of investment securities			—				—				—				—				(8	)
Increase in cash surrender value of bank-owned life insurance			190				226				230				221				213
Income from death benefit on bank-owned life insurance, net			—				—				1,489				—				—
Other income			590				298				229				320				668
Total noninterest income		$	1,711			$	2,334			$	3,368			$	2,334			$	2,222

Noninterest Expense
Noninterest expense totaled $15.2 million for the second quarter of 2023, compared to $14.9 million for the preceding quarter and $17.0 million for the second quarter a year ago. Increases in payroll tax, incentive payments, and stockholder communications during the current quarter were partially offset by decreases in advertising. The reduced expenses compared to the second quarter of 2022 reflects a $2.0 million decrease related to Quin Ventures compensation, advertising and customer acquisition costs, and occupancy expenses, as well as decreases in Bank commissions paid and non-recurring compensation expense, partially offset by higher Bank professional fees and FDIC insurance premiums. The Company continues to focus on managing expenses, with a focus on reducing advertising and discretionary spending.

Noninterest expense decreased 5.4% to $30.1 million for the six months ended June 30, 2023, compared to $31.8 million for the six months ended June 30, 2022. Compensation expense decreased $2.5 million primarily due to lower commissions, payroll taxes, and medical insurance expenses. Quin Ventures expenses included in the current six-month period totaled $320,000 compared to $2.7 million in the six months ended June 30, 2022.

Noninterest Expense
$ in thousands		2Q 23				1Q 23				4Q 22				3Q 22				2Q 22
Compensation and benefits		$	8,180			$	7,837			$	8,357			$	9,045			$	9,735
Data processing			2,080				2,038				2,119				1,778				1,870
Occupancy and equipment			1,214				1,209				1,300				1,499				1,432
Supplies, postage, and telephone			435				355				333				322				408
Regulatory assessments and state taxes			424				389				372				365				441
Advertising			929				1,041				486				645				1,405
Professional fees			884				806				762				695				629
FDIC insurance premium			313				257				235				219				211
Other expense			758				939				1,179				807				832
Total noninterest expense		$	15,217			$	14,871			$	15,143			$	15,375			$	16,963
Efficiency ratio			86.01	%			79.78	%			67.91	%			74.86	%			87.15	%

Investment Securities
Investment securities decreased $7.1 million, or 2.2%, to $322.0 million at June 30, 2023, compared to $329.1 million three months earlier, and decreased $31.2 million compared to $353.1 million at June 30, 2022. The market value of the portfolio decreased $4.2 million during the second quarter of 2023, primarily driven by an increase in long-term interest rates. At June 30, 2023, municipal bonds totaled $100.5 million and comprised the largest portion of the investment portfolio at 31.2%. Non-agency issued mortgage-backed securities were the second largest segment, totaling $92.1 million, or 28.6%, of the portfolio at quarter end. The estimated average life of the securities portfolio was approximately 7.8 years, compared to 8.1 years in the prior quarter and 8.2 years in the second quarter of 2022. The effective duration of the portfolio was approximately 5.2 years, compared to 5.1 years in the prior quarter and 5.2 years at the end of the second quarter of 2022.

Investment Securities
$ in thousands		2Q 23				1Q 23				4Q 22				3Q 22				2Q 22
Municipal bonds		$	100,503			$	101,910			$	98,050			$	96,130			$	104,048
U.S. Treasury notes			2,364				2,390				2,364				2,355				2,420
International agency issued bonds (Agency bonds)			1,717				1,745				1,702				1,683				1,762
Corporate issued debt securities (Corporate debt):			53,674				55,117				55,499				56,165				57,977
Senior positions			16,934				17,025				16,828				16,571				16,864
Subordinated bank notes			36,740				38,092				38,671				39,594				41,113
Mortgage-backed securities:
U.S. government agency issued mortgage-backed securities (MBS agency)			71,565				74,946				75,648				78,231				85,796
Non-agency issued mortgage-backed securities (MBS non-agency)			92,140				92,978				93,306				94,872				101,141

Loans and Unfunded Loan Commitments
Net loans, excluding loans held for sale, increased $58.8 million, or 3.8%, to $1.62 billion at June 30, 2023, from $1.56 billion at March 31, 2023, and increased $159.3 million, or 10.9%, from $1.46 billion one year ago. One-to-four family loans increased $11.1 million during the current quarter as a result of $3.3 million in new amortizing loan originations and $23.0 million of residential construction loans that converted to permanent amortizing loans, partially offset by sales and payments received. Multi-family loans increased $11.7 million during the current quarter. The increase was the result of new originations totaling $19.1 million and $493,000 of construction loans converting into permanent amortizing loans, partially offset by payoffs. Construction loans decreased $4.6 million during the quarter, with $27.5 million converting into fully amortizing loans, partially offset by draws on new and existing loans. Commercial real estate, automobile, and home equity loans increased $2.9 million, $2.6 million and $4.8 million, respectively, during the current quarter compared to the previous quarter as originations and draws on existing commitments exceeded payoffs and scheduled payments. Commercial business loans increased $30.1 million as a result of our participation in the Northpointe MPP of $23.9 million.

The Company originated $10.7 million in residential mortgages during the second quarter of 2023 and sold $6.4 million, with an average gross margin on sale of mortgage loans of approximately 2.00%. This production compares to residential mortgage originations of $5.8 million in the preceding quarter with sales of $5.4 million, with an average gross margin of 1.99%. The single-family home inventory increased in the second quarter of 2023 but higher market rates on mortgage loans continued to hinder saleable mortgage loan production. We have expanded our secondary market outlets and changed our portfolio pricing in an effort to improve our overall production mix. New single-family residence construction loan commitments totaled $4.8 million in the second quarter, compared to $4.9 million in the preceding quarter.

Loans by Collateral and Unfunded Commitments
$ in thousands		2Q 23				1Q 23				4Q 22				3Q 22				2Q 22
One-to-four family construction		$	74,787			$	65,770			$	63,021			$	58,038			$	60,848
All other construction and land			81,968				95,769				130,588				157,527				152,024
One-to-four family first mortgage			428,879				394,595				384,255				374,309				351,813
One-to-four family junior liens			11,956				9,140				8,219				7,244				2,701
One-to-four family revolving open-end			33,658				30,473				29,909				27,496				25,438
Commercial real estate, owner occupied:
Health care			23,157				23,311				23,463				23,909				24,058
Office			18,797				22,246				22,583				23,002				24,311
Warehouse			15,158				16,782				20,411				18,479				21,144
Other			60,054				52,212				47,778				38,282				31,375
Commercial real estate, non-owner occupied:
Office			54,926				58,711				59,216				60,655				62,971
Retail			51,824				52,175				54,800				53,186				50,818
Hospitality			53,416				45,978				46,349				44,359				44,845
Other			90,870				93,207				89,047				98,386				96,597
Multi-family residential			296,398				284,699				252,765				242,509				220,677
Commercial business loans			80,079				80,825				73,963				69,626				69,888
Commercial agriculture and fishing loans			7,844				1,829				1,847				938				525
State and political subdivision obligations			439				439				439				472				472
Consumer automobile loans			137,860				136,540				136,213				134,221				133,364
Consumer loans secured by other assets			115,646				114,343				102,333				104,272				102,685
Consumer loans unsecured			444				420				352				481				745
Total loans		$	1,638,160			$	1,579,464			$	1,547,551			$	1,537,391			$	1,477,299
Unfunded loan commitments		$	168,668			$	202,720			$	225,836			$	231,208			$	250,311

Deposits
Total deposits increased $58.9 million, to $1.65 billion at June 30, 2023, compared to $1.59 billion at March 31, 2023, and increased $72.4 million, or 4.6%, compared to $1.58 billion one year ago. Increases in brokered CDs of $45.1 million, consumer CDs of $34.7 million, business savings account balances of $14.1 million, public fund CDs of $7.1 million, business CD balances of $4.2 million, consumer savings account balances of $4.1 million, and business money market account balances of $3.6 million, were offset by decreases in consumer money market account balances of $32.1 million, business demand account balances of $11.0 million, and consumer demand account balances of $10.7 million during the second quarter. We believe decreases in certain categories were driven by customers seeking higher rates and additional diversification over a variety of account types. The current rate environment has contributed to greater competition for deposits with additional rate specials offered to attract new funds.

On July 24, 2023, the FDIC issued guidance regarding estimated uninsured deposits reporting expectations to clarify that totals should not be reduced for balances collateralized by pledged assets. The Company estimates that 24% of total deposit balances were uninsured at June 30, 2023. Approximately 16% of total deposits were uninsured business and consumer deposits with the remaining 8% consisting of uninsured public fund balances totaling $126.4 million, of which $108.5 million is fully covered through a combination of an FHLB letter of credit and our participation in the Washington Public Deposit Protection Commission program and $17.9 million is fully covered through pledged securities. Consumer deposits make up 60% of total deposits with an average balance of approximately $24,000 per account.

Deposits
$ in thousands		2Q 23				1Q 23				4Q 22				3Q 22				2Q 22
Noninterest-bearing demand deposits		$	280,475			$	292,119			$	315,083			$	342,808			$	336,311
Interest-bearing demand deposits			179,029				189,187				193,558				192,504				192,114
Money market accounts			374,269				402,760				473,009				519,018				587,747
Savings accounts			260,279				242,117				200,920				196,780				195,029
Certificates of deposit, retail			379,484				333,510				247,824				224,574				183,823
Certificates of deposit, brokered			179,586				134,515				133,861				129,551				85,700
Total deposits		$	1,653,122			$	1,594,208			$	1,564,255			$	1,605,235			$	1,580,724
Public fund and tribal deposits included in total deposits		$	130,974			$	119,969			$	103,662			$	113,690			$	131,855
Total loans to total deposits			99	%			99	%			99	%			96	%			93	%

Deposit Mix		2Q 23				1Q 23				4Q 22				3Q 22				2Q 22
Noninterest-bearing demand deposits			17.0	%			18.3	%			20.1	%			21.4	%			21.3	%
Interest-bearing demand deposits			10.8				11.9				12.4				12.0				12.2
Money market accounts			22.6				25.3				30.3				32.2				37.2
Savings accounts			15.7				15.2				12.8				12.3				12.3
Certificates of deposit, retail			23.0				20.9				15.8				14.0				11.6
Certificates of deposit, brokered			10.9				8.4				8.6				8.1				5.4

Cost of Deposits for the Quarter Ended		2Q 23				1Q 23				4Q 22				3Q 22				2Q 22
Interest-bearing demand deposits			0.45	%			0.42	%			0.17	%			0.03	%			0.05	%
Money market accounts			0.99				0.73				0.49				0.33				0.22
Savings accounts			1.22				0.70				0.17				0.05				0.05
Certificates of deposit, retail			3.25				2.59				1.65				1.05				0.73
Certificates of deposit, brokered			3.44				2.99				2.15				1.08				0.57
Cost of total deposits			1.54				1.12				0.62				0.32				0.20

Asset Quality
Nonperforming loans were $2.6 million at June 30, 2023, a decrease of $79,000 from March 31, 2023, related to decreased delinquencies in Splash unsecured consumer loans and Triad purchased manufactured home loans, partially offset by a newly delinquent single-family residential loan. The percentage of the allowance for credit losses on loans to nonperforming loans increased to 677% at June 30, 2023, from 661% at March 31, 2023, and decreased from 1269% at June 30, 2022. Classified loans increased $4.5 million to $22.7 million at June 30, 2023, due to the downgrades of a $2.5 million commercial business loan, a $1.3 million commercial real estate loan and $873,000 in additional funds disbursed on a substandard commercial construction loan during the second quarter. The allowance for credit losses on loans as a percentage of total loans was 1.06% at June 30, 2023, decreasing from 1.10% at the prior quarter end and from 1.07% reported one year earlier. The current quarter 4 basis point decrease can be attributed to construction loans converting into amortizing loans which carry lower reserve estimates along with the Northpoint MPP balance of $23.9 million which does not carry a reserve as it is a very low-risk program.

$ in thousands		2Q 23				1Q 23				4Q 22				3Q 22				2Q 22
Allowance for credit losses on loans to total loans			1.06	%			1.10	%			1.04	%			1.06	%			1.07	%
Allowance for credit losses on loans to nonperforming loans			677				661				900				463				1269
Nonperforming loans to total loans			0.16				0.17				0.12				0.22				0.08
Net charge-off ratio (annualized)			0.10				0.25				0.11				0.06				(0.03	)
Total nonperforming loans		$	2,554			$	2,633			$	1,790			$	3,517			$	1,241
Reserve for unfunded commitments		$	1,336			$	1,336			$	325			$	331			$	358

Capital
Total shareholders’ equity decreased to $159.6 million at June 30, 2023, compared to $160.3 million three months earlier, due to a decrease in the fair market value of the investment securities portfolio, net of taxes, of $3.0 million, dividends declared of $675,000 and share repurchases totaling $341,000, partially offset by net income of $1.8 million and a $1.1 million increase in the fair market value of derivatives, net of taxes. Bond values continue to be impacted by the higher rate environment.

Tangible book value per common share* was $16.39 at June 30, 2023, compared to $16.38 at March 31, 2023, and $16.40 at June 30, 2022. Book value per common share was $16.56 at June 30, 2023, compared to $16.57 at March 31, 2023, and $16.60 at June 30, 2022.

Capital levels for both the Company and its operating bank, First Fed, remain in excess of applicable regulatory requirements and the Bank was categorized as "well-capitalized" at June 30, 2023. Common Equity Tier 1 and Total Risk-Based Capital Ratios at June 30, 2023, were 13.1% and 14.1%, respectively.

		2Q 23				1Q 23				4Q 22				3Q 22				2Q 22
Equity to total assets			7.38	%			7.38	%			7.75	%			7.49	%			8.13	%
Tangible common equity ratio *			7.31				7.30				7.67				7.40				8.04
Capital ratios (First Fed Bank):
Tier 1 leverage			10.16				10.41				10.41				10.50				10.41
Common equity Tier 1 capital			13.10				13.34				13.40				13.13				13.21
Tier 1 risk-based			13.10				13.34				13.40				13.13				13.21
Total risk-based			14.08				14.35				14.42				14.16				14.24

Share Repurchase Program and Cash Dividend
First Northwest continued to return capital to our shareholders through cash dividends and share repurchases during the second quarter of 2023. We repurchased 30,176 shares of common stock under the Company's October 2020 stock repurchase plan at an average price of $11.27 per share for a total of $341,000 during the quarter ended June 30, 2023, leaving 227,410 shares remaining under the plan. In addition, the Company paid cash dividends totaling $683,000 in the second quarter of 2023. 

---

* See reconciliation of Non-GAAP Financial Measures later in this release.

Awards/Recognition

The Company has received several accolades as a leader in the community in the last year.

In June 2023, First Fed was named on the Puget Sound Business Journal’s Best Workplaces list. First Fed has been recognized as one the top 100 workplaces in Washington, as voted for two years in row by each company’s own employees.

In May 2023, First Fed was recognized as a Top Corporate Citizen by the Puget Sound Business Journal. The Corporate Citizenship Awards honors local corporate philanthropists and companies making significant contributions in the region. The top 25 small, medium and large-sized companies were recognized in addition to nine other honorees last year. First Fed was ranked #1 in the medium-sized company category in 2023 and was ranked #3 in the same category in 2022.

In March 2023, First Fed won “Best Bank” in Cascadia Daily News 2023 Readers' Choice. It was the first year that First Fed had participated in this Whatcom County poll.

First Fed has been rated a 5-star bank by Bauer Financial, a leading independent bank and credit union rating and research firm. This top rating indicates that First Fed is one of the strongest banks in the nation based on capital, loan quality and other detailed performance criteria.

In October 2022, First Fed was also recognized in the Best of the Peninsula surveys, winning Best Bank for both Clallam and Jefferson counties. The Bank was a finalist for Best Bank on Bainbridge Island and Central Kitsap. Also, First Fed received Best Financial Advisor in Jefferson.

In September 2022, the First Fed team was honored to bring home the Gold for Best Bank in the Best of the Northwest survey hosted by Bellingham Alive. 

About the Company

First Northwest Bancorp (Nasdaq: FNWB) is a financial holding company engaged in investment activities including the business of its subsidiary, First Fed Bank. First Fed is a Pacific Northwest-based financial institution which has served its customers and communities since 1923. Currently First Fed has 16 locations in Washington state including 12 full-service branches. First Fed’s business and operating strategy is focused on building sustainable earnings by delivering a full array of financial products and services for individuals, small businesses, non-profit organizations, and commercial customers. In 2022, First Northwest made an investment in The Meriwether Group, LLC, a boutique investment banking and accelerator firm. Additionally, First Northwest focuses on strategic partnerships to provide modern financial services such as digital payments and marketplace lending. First Northwest Bancorp was incorporated in 2012 and completed its initial public offering in 2015 under the ticker symbol FNWB. The Company is headquartered in Port Angeles, Washington.

Forward-Looking Statements

Certain matters discussed in this press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to, among other things, expectations of the business environment in which we operate, projections of future performance, perceived opportunities in the market, potential future credit experience, and statements regarding our mission and vision. These forward-looking statements are based upon current management expectations and may, therefore, involve risks and uncertainties. Our actual results, performance, or achievements may differ materially from those suggested, expressed, or implied by forward-looking statements as a result of a wide variety of factors including, but not limited to: increased competitive pressures; changes in the interest rate environment; the credit risks of lending activities; pressures on liquidity, including as a result of withdrawals of deposits or declines in the value of our investment portfolio; changes in general economic conditions and conditions within the securities markets; legislative and regulatory changes; and other factors described in the Company’s latest Annual Report on Form 10-K and other filings with the Securities and Exchange Commission ("SEC"),which are available on our website at www.ourfirstfed.com and on the SEC’s website at www.sec.gov.

Any of the forward-looking statements that we make in this Press Release and in the other public statements we make may turn out to be incorrect because of the inaccurate assumptions we might make, because of the factors illustrated above or because of other factors that we cannot foresee. Because of these and other uncertainties, our actual future results may be materially different from those expressed or implied in any forward-looking statements made by or on our behalf and the Company's operating and stock price performance may be negatively affected. Therefore, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for 2023 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us and could negatively affect the Company’s operations and stock price performance.

For More Information Contact:
Matthew P. Deines, President and Chief Executive Officer
Geri Bullard, EVP and Chief Financial Officer
IRGroup@ourfirstfed.com
360-457-0461

FIRST NORTHWEST BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data) (Unaudited)
		June 30, 2023				March 31, 2023				June 30, 2022				Three Month Change				One Year Change
ASSETS
Cash and due from banks		$	19,294			$	17,844			$	19,006				8.1	%			1.5	%
Interest-earning deposits in banks			59,008				122,773				68,789				-51.9				-14.2
Investment securities available for sale, at fair value			321,963				329,086				353,144				-2.2				-8.8
Loans held for sale			2,049				—				696				100.0				194.4
Loans receivable (net of allowance for credit losses on loans $17,297, $17,396, and $15,747)			1,620,863				1,562,068				1,461,552				3.8				10.9
Federal Home Loan Bank (FHLB) stock, at cost			12,621				15,602				10,402				-19.1				21.3
Accrued interest receivable			7,480				7,205				5,802				3.8				28.9
Premises and equipment, net			18,140				18,252				21,291				-0.6				-14.8
Servicing rights on sold loans, at fair value			3,825				4,224				3,865				-9.4				-1.0
Bank-owned life insurance, net			40,066				39,878				39,783				0.5				0.7
Equity and partnership investments			14,569				14,392				11,452				1.2				27.2
Goodwill and other intangible assets, net			1,087				1,088				1,176				-0.1				-7.6
Deferred tax asset, net			15,031				14,211				9,310				5.8				61.5
Prepaid expenses and other assets			26,882				25,471				25,364				5.5				6.0
Total assets		$	2,162,878			$	2,172,094			$	2,031,632				-0.4	%			6.5	%
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits		$	1,653,122			$	1,594,208			$	1,580,724				3.7	%			4.6	%
Borrowings			303,397				379,377				249,319				-20.0				21.7
Accrued interest payable			1,367				508				461				169.1				196.5
Accrued expenses and other liabilities			44,286				35,255				35,040				25.6				26.4
Advances from borrowers for taxes and insurance			1,149				2,410				934				-52.3				23.0
Total liabilities			2,003,321				2,011,758				1,866,478				-0.4				7.3
Shareholders' Equity
Preferred stock, $0.01 par value, authorized 5,000,000 shares, no shares issued or outstanding			—				—				—				n/a				n/a
Common stock, $0.01 par value, authorized 75,000,000 shares; issued and outstanding 9,633,496 at June 30, 2023; issued and outstanding 9,674,055 at March 31, 2023; and issued and outstanding 9,950,172 at June 30, 2022			96				97				100				-1.0				-4.0
Additional paid-in capital			95,360				95,333				96,479				0.0				-1.2
Retained earnings			111,750				114,139				107,000				-2.1				4.4
Accumulated other comprehensive loss, net of tax			(40,066	)			(38,108	)			(28,447	)			-5.1				-40.8
Unearned employee stock ownership plan (ESOP) shares			(7,583	)			(7,749	)			(8,242	)			2.1				8.0
Total parent's shareholders' equity			159,557				163,712				166,890				-2.5				-4.4
Noncontrolling interest in Quin Ventures, Inc.			—				(3,376	)			(1,736	)			100.0				100.0
Total shareholders' equity			159,557				160,336				165,154				-0.5				-3.4
Total liabilities and shareholders' equity		$	2,162,878			$	2,172,094			$	2,031,632				-0.4	%			6.5	%

FIRST NORTHWEST BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data) (Unaudited)
		Quarter Ended
		June 30, 2023				March 31, 2023				June 30, 2022				Three Month Change				One Year Change
INTEREST INCOME
Interest and fees on loans receivable		$	21,299			$	19,504			$	16,081				9.2	%			32.4	%
Interest on investment securities			3,336				3,182				2,715				4.8				22.9
Interest on deposits in banks			617				404				46				52.7				1,241.3
FHLB dividends			222				192				119				15.6				86.6
Total interest income			25,474				23,282				18,961				9.4				34.3
INTEREST EXPENSE
Deposits			6,209				4,353				796				42.6				680.0
Borrowings			3,283				2,624				922				25.1				256.1
Total interest expense			9,492				6,977				1,718				36.0				452.5
Net interest income			15,982				16,305				17,243				-2.0				-7.3
Provision for (recapture of) credit losses			300				(500	)			500				160.0				-40.0
Net interest income after provision for (recapture of) credit losses			15,682				16,805				16,743				-6.7				-6.3
NONINTEREST INCOME
Loan and deposit service fees			1,064				1,141				1,091				-6.7				-2.5
Sold loan servicing fees and servicing right mark-to-market			(191	)			493				27				-138.7				-807.4
Net gain on sale of loans			58				176				231				-67.0				-74.9
Net (loss) gain on sale of investment securities			—				—				(8	)			n/a				100.0
Increase in cash surrender value of bank-owned life insurance			190				226				213				-15.9				-10.8
Other income			590				298				668				98.0				-11.7
Total noninterest income			1,711				2,334				2,222				-26.7				-23.0
NONINTEREST EXPENSE
Compensation and benefits			8,180				7,837				9,735				4.4				-16.0
Data processing			2,080				2,038				1,870				2.1				11.2
Occupancy and equipment			1,214				1,209				1,432				0.4				-15.2
Supplies, postage, and telephone			435				355				408				22.5				6.6
Regulatory assessments and state taxes			424				389				441				9.0				-3.9
Advertising			929				1,041				1,405				-10.8				-33.9
Professional fees			884				806				629				9.7				40.5
FDIC insurance premium			313				257				211				21.8				48.3
Other expense			758				939				832				-19.3				-8.9
Total noninterest expense			15,217				14,871				16,963				2.3				-10.3
Income before provision for income taxes			2,176				4,268				2,002				-49.0				8.7
Provision for income taxes			475				825				467				-42.4				1.7
Net income			1,701				3,443				1,535				-50.6				10.8
Net loss attributable to noncontrolling interest in Quin Ventures, Inc.			75				85				953				-11.8				-92.1
Net income attributable to parent		$	1,776			$	3,528			$	2,488				-49.7	%			-28.6	%
Basic and diluted earnings per common share		$	0.20			$	0.39			$	0.27				-48.7	%			-25.9	%

FIRST NORTHWEST BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data) (Unaudited)
		Six Months Ended June 30								Percent
		2023				2022				Change
INTEREST INCOME
Interest and fees on loans receivable		$	40,803			$	30,617				33.3	%
Interest on investment securities			6,518				4,990				30.6
Interest on deposits in banks			1,021				84				1,115.5
FHLB dividends			414				171				142.1
Total interest income			48,756				35,862				36.0
INTEREST EXPENSE
Deposits			10,562				1,513				598.1
Borrowings			5,907				1,620				264.6
Total interest expense			16,469				3,133				425.7
Net interest income			32,287				32,729				-1.4
(Recapture of) provision for credit losses			(200	)			500				-140.0
Net interest income after (recapture of) provision for credit losses			32,487				32,229				0.8
NONINTEREST INCOME
Loan and deposit service fees			2,205				2,264				-2.6
Sold loan servicing fees and servicing right mark-to-market			302				459				-34.2
Net gain on sale of loans			234				484				-51.7
Net gain on sale of investment securities			—				118				-100.0
Increase in cash surrender value of bank-owned life insurance			416				465				-10.5
Other income			888				835				6.3
Total noninterest income			4,045				4,625				-12.5
NONINTEREST EXPENSE
Compensation and benefits			16,017				18,538				-13.6
Data processing			4,118				3,642				13.1
Occupancy and equipment			2,423				2,599				-6.8
Supplies, postage, and telephone			790				721				9.6
Regulatory assessments and state taxes			813				802				1.4
Advertising			1,970				2,157				-8.7
Professional fees			1,690				1,188				42.3
FDIC insurance premium			570				434				31.3
Other			1,697				1,713				-0.9
Total noninterest expense			30,088				31,794				-5.4
Income before provision for income taxes			6,444				5,060				27.4
Provision for income taxes			1,300				1,021				27.3
Net income			5,144				4,039				27.4
Net loss attributable to noncontrolling interest in Quin Ventures, Inc.			160				1,255				-87.3
Net income attributable to parent		$	5,304			$	5,294				0.2	%
Basic and diluted earnings per common share		$	0.59			$	0.58				1.7	%

FIRST NORTHWEST BANCORP AND SUBSIDIARY
Selected Financial Ratios and Other Data
(Dollars in thousands, except per share data) (Unaudited)
		As of or For the Quarter Ended
		June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022				June 30, 2022
Performance ratios: (1)
Return on average assets			0.34	%			0.70	%			1.18	%			0.85	%			0.51	%
Return on average equity			4.41				8.98				15.26				10.12				5.75
Average interest rate spread			2.84				3.14				3.72				3.72				3.65
Net interest margin (2)			3.25				3.46				3.96				3.88				3.77
Efficiency ratio (3)			86.0				79.8				67.9				74.9				87.2
Equity to total assets			7.38				7.38				7.75				7.49				8.13
Average interest-earning assets to average interest-bearing liabilities			120.7				122.4				124.8				128.6				130.0
Book value per common share		$	16.56			$	16.57			$	16.31			$	15.69			$	16.60
Tangible performance ratios:
Tangible assets (4)		$	2,161,235			$	2,170,202			$	2,040,267			$	2,089,454			$	2,029,702
Tangible common equity (4)			157,914				158,444				156,479				154,612				163,224
Tangible common equity ratio (4)			7.31	%			7.30	%			7.67	%			7.40	%			8.04	%
Return on tangible common equity (4)			4.47				9.08				15.45				10.23				5.82
Tangible book value per common share (4)		$	16.39			$	16.38			$	16.13			$	15.50			$	16.40
Asset quality ratios:
Nonperforming assets to total assets at end of period (5)			0.12	%			0.12	%			0.09	%			0.17	%			0.06	%
Nonperforming loans to total loans (6)			0.16				0.17				0.12				0.22				0.08
Allowance for credit losses on loans to nonperforming loans (6)			677.25				660.69				900.34				462.70				1268.90
Allowance for credit losses on loans to total loans			1.06				1.10				1.04				1.06				1.07
Annualized net charge-offs (recoveries) to average outstanding loans			0.10				0.25				0.11				0.06				(0.03	)
Capital ratios (First Fed Bank):
Tier 1 leverage			10.2	%			10.4	%			10.4	%			10.5	%			10.4	%
Common equity Tier 1 capital			13.1				13.3				13.4				13.1				13.2
Tier 1 risk-based			13.1				13.3				13.4				13.1				13.2
Total risk-based			14.1				14.4				14.4				14.2				14.2
Other Information:
Average total assets		$	2,118,014			$	2,050,210			$	2,039,016			$	1,996,765			$	1,963,665
Average total loans			1,605,133				1,552,299				1,554,276				1,500,508				1,455,038
Average interest-earning assets			1,975,384				1,909,271				1,895,799				1,859,396				1,836,202
Average noninterest-bearing deposits			282,514				294,235				326,450				342,944				344,827
Average interest-bearing deposits			1,333,943				1,288,429				1,243,185				1,224,548				1,223,888
Average interest-bearing liabilities			1,636,188				1,559,983				1,519,106				1,446,428				1,412,327
Average equity			161,387				159,319				157,590				168,264				173,584
Average shares -- basic			8,914,355				8,911,294				9,069,493				9,093,821				9,094,894
Average shares -- diluted			8,931,386				8,939,601				9,106,453				9,138,123				9,166,131

(1	)	Performance ratios are annualized, where appropriate.
(2	)	Net interest income divided by average interest-earning assets.
(3	)	Total noninterest expense as a percentage of net interest income and total other noninterest income.
(4	)	See reconciliation of Non-GAAP Financial Measures later in this release.
(5	)	Nonperforming assets consists of nonperforming loans (which include nonaccruing loans and accruing loans more than 90 days past due), real estate owned and repossessed assets.
(6	)	Nonperforming loans consists of nonaccruing loans and accruing loans more than 90 days past due.

		As of or For the Six Months Ended June 30,
		2023				2022
Performance ratios: (1)
Return on average assets			0.51	%			0.55	%
Return on average equity			6.67				5.88
Average interest rate spread			2.98				3.54
Net interest margin (2)			3.35				3.65
Efficiency ratio (3)			82.8				85.1
Equity to total assets			7.38				8.13
Average interest-earning assets to average interest-bearing liabilities			121.5				131.1
Book value per common share		$	16.56			$	16.60
Tangible performance ratios:
Tangible assets (4)		$	2,161,235			$	2,029,702
Tangible common equity (4)			157,914				163,224
Tangible common equity ratio (4)			7.31	%			8.04	%
Return on tangible common equity (4)			6.75				5.96
Tangible book value per common share (4)		$	16.39			$	16.40
Asset quality ratios:
Nonperforming assets to total assets at end of period (5)			0.12	%			0.06	%
Nonperforming loans to total loans (6)			0.16				0.08
Allowance for credit losses on loans to nonperforming loans (6)			677.25				1268.90
Allowance for credit losses on loans to total loans			1.06				1.07
Annualized net charge-offs (recoveries) to average outstanding loans			0.17				(0.02	)
Capital ratios (First Fed Bank):
Tier 1 leverage			10.2	%			10.4	%
Common equity Tier 1 capital			13.1				13.2
Tier 1 risk-based			13.1				13.2
Total risk-based			14.1				14.2
Other Information:
Average total assets		$	2,084,299			$	1,931,868
Average total loans			1,605,133				1,400,461
Average interest-earning assets			1,942,510				1,807,115
Average noninterest-bearing deposits			288,343				336,611
Average interest-bearing deposits			1,311,311				1,222,612
Average interest-bearing liabilities			1,598,295				1,377,962
Average equity			160,359				181,475
Average shares -- basic			8,912,358				9,082,373
Average shares -- diluted			8,932,117				9,167,315

(1	)	Performance ratios are annualized, where appropriate.
(2	)	Net interest income divided by average interest-earning assets.
(3	)	Total noninterest expense as a percentage of net interest income and total other noninterest income.
(4	)	See reconciliation of Non-GAAP Financial Measures later in this release.
(5	)	Nonperforming assets consists of nonperforming loans (which include nonaccruing loans and accruing loans more than 90 days past due), real estate owned and repossessed assets.
(6	)	Nonperforming loans consists of nonaccruing loans and accruing loans more than 90 days past due.

FIRST NORTHWEST BANCORP AND SUBSIDIARY
ADDITIONAL INFORMATION
(Dollars in thousands) (Unaudited)
Selected loan detail:
		June 30, 2023				March 31, 2023				June 30, 2022				Three Month Change				One Year Change
		(In thousands)
Commercial business loans breakout
PPP loans		$	54			$	72			$	1,751			$	(18	)		$	(1,697	)
Northpointe Bank MPP			23,904				—				—				23,904				23,904
Secured lines of credit			38,355				30,723				12,989				7,632				25,366
Unsecured lines of credit			1,231				588				981				643				250
SBA loans			9,038				8,805				10,432				233				(1,394	)
Other commercial business loans			57,551				59,798				44,909				(2,247	)			12,642
Total commercial business loans		$	130,133			$	99,986			$	71,062			$	30,147			$	59,071
Auto and other consumer loans breakout
Triad Manufactured Home loans		$	90,792			$	102,424			$	79,659			$	(11,632	)		$	11,133
Woodside auto loans			125,948				123,337				110,499				2,611				15,449
First Help auto loans			5,602				6,281				6,724				(679	)			(1,122	)
Other auto loans			6,188				7,350				11,097				(1,162	)			(4,909	)
Other consumer loans			25,420				11,910				28,764				13,510				(3,344	)
Total auto and other consumer loans		$	253,950			$	251,302			$	236,743			$	2,648			$	17,207
Construction and land loans breakout
1-4 Family construction		$	65,025			$	87,269			$	74,520			$	(22,244	)		$	(9,495	)
Multifamily construction			58,070				51,788				88,922				6,282				(30,852	)
Acquisition-renovation			7,266				7,096				27,103				170				(19,837	)
Nonresidential construction			19,033				6,909				12,651				12,124				6,382
Land and development			7,666				8,600				9,866				(934	)			(2,200	)
Total construction and land loans		$	157,060			$	161,662			$	213,062			$	(4,602	)		$	(56,002	)

FIRST NORTHWEST BANCORP AND SUBSIDIARY

ADDITIONAL INFORMATION

(Dollars in thousands) (Unaudited)

Non-GAAP Financial Measures
This press release contains financial measures that are not defined in generally accepted accounting principles ("GAAP"). Non-GAAP measures are presented where management believes the information will help investors understand the Company’s results of operations or financial position and assess trends. Where non-GAAP financial measures are used, the comparable GAAP financial measure is also provided. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, and are not necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of the GAAP and non-GAAP measures are presented below.

Calculations Based on Tangible Common Equity:
		June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022				June 30, 2022
		(Dollars in thousands, except per share data)
Total shareholders' equity		$	159,557			$	160,336			$	158,282			$	156,599			$	165,154
Less: Goodwill and other intangible assets			1,087				1,088				1,089				1,173				1,176
Disallowed non-mortgage loan servicing rights			556				804				714				814				754
Total tangible common equity		$	157,914			$	158,444			$	156,479			$	154,612			$	163,224
Total assets		$	2,162,878			$	2,172,094			$	2,042,070			$	2,091,441			$	2,031,632
Less: Goodwill and other intangible assets			1,087				1,088				1,089				1,173				1,176
Disallowed non-mortgage loan servicing rights			556				804				714				814				754
Total tangible assets		$	2,161,235			$	2,170,202			$	2,040,267			$	2,089,454			$	2,029,702
Average shareholders' equity		$	161,387			$	159,319			$	157,590			$	168,264			$	173,584
Less: Average goodwill and other intangible assets			1,088				1,089				1,171				1,175				1,179
Average disallowed non-mortgage loan servicing rights			801				715				813				755				949
Total average tangible common equity		$	159,498			$	157,515			$	155,606			$	166,334			$	171,456
Tangible common equity ratio (1)			7.31	%			7.30	%			7.67	%			7.40	%			8.04	%
Net income		$	1,776			$	3,528			$	6,060			$	4,291			$	2,488
Return on tangible common equity (1)			4.47	%			9.08	%			15.45	%			10.23	%			5.82	%
Common shares outstanding			9,633,496				9,674,055				9,703,581				9,978,041				9,950,172
Tangible book value per common share (1)		$	16.39			$	16.38			$	16.13			$	15.50			$	16.40
GAAP Ratios:
Equity to total assets			7.38	%			7.38	%			7.75	%			7.49	%			8.13	%
Return on average equity			4.41	%			8.98	%			15.26	%			10.12	%			5.75	%
Book value per common share		$	16.56			$	16.57			$	16.31			$	15.69			$	16.60

		June 30, 2023				June 30, 2022
		(Dollars in thousands, except per share data)
Total shareholders' equity		$	159,557			$	165,154
Less: Goodwill and other intangible assets			1,087				1,176
Disallowed non-mortgage loan servicing rights			556				754
Total tangible common equity		$	157,914			$	163,224
Total assets		$	2,162,878			$	2,031,632
Less: Goodwill and other intangible assets			1,087				1,176
Disallowed non-mortgage loan servicing rights			556				754
Total tangible assets		$	2,161,235			$	2,029,702
Average shareholders' equity		$	160,359			$	181,475
Less: Average goodwill and other intangible assets			1,088				1,180
Average disallowed non-mortgage loan servicing rights			758				1,164
Total average tangible common equity		$	158,513			$	179,131
Tangible common equity ratio (1)			7.31	%			8.04	%
Net income		$	5,304			$	5,294
Return on tangible common equity (1)			6.75	%			5.96	%
Common shares outstanding			9,633,496				9,950,172
Tangible book value per common share (1)		$	16.39			$	16.40
GAAP Ratios:
Equity to total assets			7.38	%			8.13	%
Return on average equity			6.67	%			5.88	%
Book value per common share		$	16.56			$	16.60

Non-GAAP Financial Measures Footnote

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We believe these non-GAAP metrics provide an important measure with which to analyze and evaluate financial condition and capital strength. In addition, we believe that use of tangible equity and tangible assets improves the comparability to other institutions that have not engaged in acquisitions that resulted in recorded goodwill and other intangibles.