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.