NASDAQ: FNWB

First Northwest's limited partnership investments include Canapi Ventures Fund, LP ("Canapi Ventures"); BankTech Ventures, LP; and JAM FINTOP Frontier Fund, LP. These limited partnerships invest in fintech-related businesses with a focus on developing digital solutions applicable to the banking industry. In 2022, First Northwest acquired a 33% interest in MWG, a boutique investment bank and consulting firm focused on providing entrepreneurs with resources to help them succeed. Also in 2022, the Company acquired a 25% equity interest as a general partner in Meriwether Group Capital, LLC ("MWGC"), which provides financial advice for borrowers and capital for the Hero Fund. MWG also holds a 20% general partner interest in MWGC. MWGC holds a 0.01% general partner interest in the Hero Fund. Subsequent to year end, the Company redeemed its interest in MWGC in full at par.

The executive office of the Company is located at 105 West 8th Street, Port Angeles, Washington 98362, and its telephone number is (360) 457-0461.

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Market Area

We operate through twelve full-service branch offices and five business centers located in Washington State. We have five branches in Clallam County, one in Jefferson County, one in King County, two in Kitsap County, and three in Whatcom County. We have two business centers located in Clallam County, one in King County, one in Snohomish County, and one in Whatcom County. The branch located in King County will be closing on April 30, 2026.

Clallam County has a population of approximately 77,958 and estimated median family income of $70,370. The economic base in Clallam County is dependent on government, healthcare, education, tourism, marine services, forest products, agriculture, and technology industries. The primary employers in Clallam County include the Olympic Medical Center, Peninsula College, the Port Angeles School District, Clallam County government, Jamestown S'Klallam Tribe, Clallam Bay Corrections Center, and the Westport Shipyard. According to the U.S. Bureau of Labor Statistics, the unemployment rate for Clallam County was 6.0% at December 31, 2025, compared to 5.9% at December 31, 2024. By comparison, the unemployment rate for the state of Washington was 4.7%, and the national average was 4.4% at December 31, 2025.

Jefferson County has a population of approximately 33,944 and estimated median family income of $74,048. The economic base in Jefferson County is dependent on government, healthcare, education, tourism, arts and culture, maritime and boat building, and small-scale manufacturing. The primary employers in Jefferson County include Port Townsend Paper, Jefferson Healthcare, Port Townsend School District, the Port Authority of Port Townsend and related marine trade, and the Jefferson County government. According to the U.S. Bureau of Labor Statistics, the unemployment rate for Jefferson County was 6.1% at December 31, 2025, compared to 5.5% at December 31, 2024.

Kitsap County has a population of approximately 281,420 and estimated median family income of $104,158. The economic base of Kitsap County is largely supported by the United States Navy through personnel stationed at Kitsap Naval Base along with other employers supporting the military. Private industries that support the economic base are healthcare, retail and tourism. Other primary employers in Kitsap County include the Department of Defense, Amazon, Walmart, St. Michael Medical Center, Catholic Health Initiatives, and Port Madison Enterprises, which owns and operates the Clearwater Casino and Resort, gas stations and other retail operations. According to the U.S. Bureau of Labor Statistics, the unemployment rate for Kitsap County was 5.0% at December 31, 2025, compared to 4.3% at December 31, 2024.

Whatcom County has a population of approximately 234,954 and estimated median family income of $81,784. The economic base of Whatcom County is largely supported by healthcare, education and crude oil refinery industries. There is some niche manufacturing and a large variety of other small businesses that create a well-rounded economy with a close proximity to the Canadian border bringing in shoppers seeking retail products and services. The primary employers in Whatcom County include PeaceHealth Medical Center, Western Washington University, Bellingham School District, Avamere Living, and BP Cherry Point Refinery. According to the U.S. Bureau of Labor Statistics, the unemployment rate for Whatcom County was 5.2% at December 31, 2025, compared to 4.6% at December 31, 2024.

King County, which includes the City of Seattle, has a population of approximately 2.3 million and estimated median family income of $124,746. The economic base of King County is largely supported by technology, services, and manufacturing industries. The primary employers in King County include Microsoft, Amazon, Boeing, University of Washington, Starbucks, Salesforce, and the King County government. According to the U.S. Bureau of Labor Statistics, the unemployment rate for King County was 4.9% at December 31, 2025, compared to 3.8% at December 31, 2024.

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As a part of our business plan, we intend to extend our traditional and digital operations in the Puget Sound Region. This region dominates the economy of the Pacific Northwest and is broadly defined as the area surrounding the Puget Sound that extends into the northwestern quadrant of the state of Washington. Our current market area, described previously, has a population of 3.0 million, or 37.1%, of the state's population. The population of the Puget Sound region beyond our current market area is approximately 2.4 million, or 29.3% of the state's population. The market area is a mix of urban, suburban and rural areas, with the Seattle metropolitan area representing a well-developed urban center. The region extends from Whatcom County in the north on the Canadian border to Thurston and Pierce counties to the south. Other key metropolitan areas within the Puget Sound region include Bellingham (Whatcom County), Mount Vernon (Skagit County), Everett (Snohomish County), Tacoma (Pierce County) and Olympia (Thurston County).

Key employment sectors in the Puget Sound region include aerospace, military, information technology, biotechnology, education, logistics, international trade, and tourism. The region is well known for the long-term presence of Boeing and Microsoft, two major industry leaders, and since the turn of the century, Amazon. The military presence includes a number of large installations serving the U.S. Air Force, Army and Navy. Given the employment profile and the presence of the University of Washington and other universities, the region's workforce is highly educated. Washington's geographic proximity to the Pacific Rim along with multiple deep-water ports makes it a center for international trade, which contributes significantly to the regional economy. The local ports make Washington the ninth largest exporting state in the nation. The top five trading partners with Washington include China, Canada, South Korea, Japan and Mexico. Tourism is a major industry due to the scenic beauty, temperate climate, and incredible food and culture. The maritime industry, supported by the trade and fishing industries, is also an important employment sector.

For a discussion regarding the competition in our primary market area, see "Competition."

Our Products and Services

Lending Activities

General. First Fed’s principal lending activities are concentrated in real estate secured loans with first lien one-to-four family mortgage, commercial, and multi-family loans. First Fed also makes construction and land loans (including lot loans and multi-family acquisition-renovation loans), commercial business loans, and consumer loans, consisting primarily of home-equity loans and lines of credit. The Bank also purchases automobile and manufactured home loans from known, experienced third-party originators. The Bank utilizes interest rate swaps designated as fair value hedges to manage its exposure to rate fluctuations which results in a derivative basis adjustment included in net loans receivable.

Loan Portfolio Analysis

The following table represents information concerning the composition of our loan portfolio, excluding loans held for sale, by the type of loan at the dates indicated:

December 31, 2025

December 31, 2024

(dollars in thousands)

Amount

Percent

Amount

Percent

Real estate:

One-to-four family

$
376,731

23.1
%

$
395,315

23.3
%

Multi-family

288,529

17.7

332,596

19.6

Commercial real estate

402,683

24.8

390,379

23.0

Construction and land

61,268

3.8

78,110

4.6

Total real estate loans

1,129,211

69.4

1,196,400

70.5

Consumer:

Home equity

85,088

5.2

79,054

4.7

Auto and other consumer

283,502

17.4

268,876

15.9

Total consumer loans

368,590

22.6

347,930

20.6

Commercial business loans

130,311

8.0

151,493

8.9

Total loans

1,628,112

100.0
%

1,695,823

100.0
%

Less:

Derivative basis adjustment

(903
)

188

Allowance for credit losses on loans

16,987

20,449

Total loans, net

$
1,612,028

$
1,675,186

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Fixed-Rate and Adjustable-Rate Loans

The following table shows the composition of our loan portfolio, excluding loans held for sale, in dollar amounts and in percentages by fixed rates and adjustable rates at the dates indicated:

December 31, 2025

December 31, 2024

(dollars in thousands)

Amount

Percent

Amount

Percent

Fixed-rate loans:

Real estate:

One-to-four family

$
273,349

16.8
%

$
291,237

17.2
%

Multi-family

95,610

5.9

112,711

6.6

Commercial real estate

126,541

7.8

136,183

8.0

Construction and land

5,890

0.4

7,337

0.4

Total real estate loans

501,390

30.9

547,468

32.2

Consumer:

Home equity

29,201

1.8

28,413

1.7

Auto and other consumer

282,677

17.3

268,358

15.8

Total consumer loans

311,878

19.1

296,771

17.5

Commercial business loans

61,934

3.8

85,852

5.1

Total fixed-rate loans

875,202

53.8

930,091

54.8

Adjustable-rate loans:

Real estate:

One-to-four family

103,382

6.3

104,078

6.1

Multi-family

192,919

11.8

219,885

13.0

Commercial real estate

276,142

17.0

254,196

15.0

Construction and land

55,378

3.4

70,773

4.2

Total real estate loans

627,821

38.5

648,932

38.3

Consumer:

Home equity

55,887

3.4

50,641

3.0

Auto and other consumer

825

0.1

518

—

Total consumer loans

56,712

3.5

51,159

3.0

Commercial business loans

68,377

4.2

65,641

3.9

Total adjustable-rate loans

752,910

46.2

765,732

45.2

Total loans

1,628,112

100.0
%

1,695,823

100.0
%

Less:

Derivative basis adjustment

(903
)

188

Allowance for credit losses on loans

16,987

20,449

Total loans, net

$
1,612,028

$
1,675,186

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Loan Maturity

The following tables illustrate the contractual maturity of our loan portfolio at December 31, 2025. Mortgages that have adjustable or renegotiable interest rates are shown as maturing in the period during which the contract is due. These tables do not reflect the effects of unscheduled principal prepayments.

One Year or Less (1)

After One Year Through Five Years

After Five Years Through Fifteen Years

Beyond Fifteen Years

Total

(dollars in thousands)

Amount

Weighted Average Rate

Amount

Weighted Average Rate

Amount

Weighted Average Rate

Amount

Weighted Average Rate

Amount

Weighted Average Rate

Real estate:

One-to-four family

$
376

3.52
%

$
1,834

3.44
%

$
23,471

4.21
%

$
351,050

4.03
%

$
376,731

4.04
%

Multi-family

22,958

5.54

118,488

5.33

142,295

4.98

4,788

6.98

288,529

5.20

Commercial real estate

29,655

4.25

141,236

5.60

228,483

5.84

3,309

5.06

402,683

5.63

Construction and land

50,089

7.61

10,967

7.50

11

—

201

6.38

61,268

7.58

Consumer:

Home equity

125

8.94

2,307

6.81

29,454

5.77

53,202

7.05

85,088

6.60

Auto and other consumer

1,315

10.64

17,543

7.84

143,023

8.16

121,621

7.13

283,502

7.73

Commercial business loans

42,766

6.79

24,692

7.31

62,853

7.27

—

—

130,311

7.12

Total loans receivable

$
147,284

6.39
%

$
317,067

5.81
%

$
629,590

6.23
%

$
534,171

5.00
%

$
1,628,112

5.77
%

_______________

(1) Includes demand loans, loans having no stated maturity, and overdraft loans.

(dollars in thousands)

Fixed Interest Rate

Floating or Variable Rate

Total

Loans above maturing after one year:

Real estate:

One-to-four family

$
272,974

$
103,381

$
376,355

Multi-family

73,779

191,793

265,572

Commercial real estate

101,259

271,768

373,027

Construction and land

3,674

7,505

11,179

Consumer:

Home equity

29,194

55,769

84,963

Auto and other consumer

282,187

—

282,187

Commercial business loans

39,410

48,135

87,545

Total loans maturing after one year

$
802,477

$
678,351

$
1,480,828

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One-to-Four Family Real Estate Lending. At December 31, 2025, one-to-four family residential mortgage loans (excluding loans held for sale) totaled $376.7 million, or 23.1%, of our total loan portfolio, including $12.0 million, or 3.2%, of loans secured by properties outside the state of Washington, primarily purchased loans in the state of California. We originate both fixed and adjustable-rate residential loans, which can be sold in the secondary market or retained in our portfolio, and supplement those originations with loan purchases, from time to time, depending on our balance sheet objectives. Residential loans are underwritten to either secondary market standards for sale or to internal underwriting standards, which may not meet Federal Home Loan Mortgage Corporation ("Freddie Mac") or Federal National Mortgage Association ("Fannie Mae") eligibility requirements.

Fixed-rate residential mortgages are offered with repayment terms between 10 and 30 years, priced from Freddie Mac posted daily pricing indications adjusted for economic and competitive considerations. Adjustable-rate residential mortgage products with similar amortization terms are also offered, with an interest rate that is typically fixed for an initial period ranging from one to seven years with annual adjustments thereafter. Future interest rate adjustments include periodic caps of no more than 2% and lifetime caps of 5% to 6% above the initial interest rate, with no borrower prepayment restrictions.

The credit risk on adjustable-rate mortgage loans could increase when interest rates rise. An increase to the borrower's loan payment may affect the borrower's ability to repay and could increase the probability of default. To mitigate this risk to both the borrower and First Fed, adjustable-rate loans contain both periodic and lifetime interest rate caps, limiting the amount of payment changes. In addition, depending on market conditions, we may underwrite the borrower at a higher interest rate and payment amount than the initial rate. At December 31, 2025, the average interest rate on our adjustable-rate mortgage loans was approximately 170 basis points under the fully indexed rate. As of December 31, 2025, we had $103.4 million, or 27.4%, of adjustable-rate residential mortgage loans in our residential loan portfolio.

The underwriting process considers a variety of factors including credit history, debt to income ratios, property type, loan-to-value ratio, and occupancy. For loans with over 80% loan-to-value ratios, we typically require private mortgage insurance, which reduces our exposure to loss in the event of a loan default. Credit risk is also mitigated by obtaining title insurance, hazard insurance, and flood insurance. Residential mortgage loans which require appraisals are appraised by independent fee-based appraisers.

In connection with rules and regulations issued by the Consumer Financial Protection Bureau ("CFPB"), we are required to make a reasonable, good-faith determination before or when we consummate a mortgage loan that the borrower has a reasonable ability to repay the loan, and in some cases involving qualified mortgages, we are presumed to have complied with this requirement. We believe that mortgage loans originated by the bank meet these standards.

First Fed does not actively engage in subprime mortgage lending, either through advertising, marketing, underwriting and/or risk selection, and has no established program to originate or purchase subprime mortgage loans.

Commercial and Multi-Family Real Estate Lending. At December 31, 2025, $402.7 million, or 24.8%, and $288.5 million, or 17.7%, of our total loan portfolio was secured by commercial and multi-family real estate property, respectively. At December 31, 2025, we identified $115.1 million, or 16.7%, of our commercial and multi-family real estate portfolio as owner-occupied commercial real estate and $576.1 million, or 83.3%, is secured by income producing, or non-owner-occupied, commercial and multi-family real estate. Over 97% of our commercial real estate and multi-family loans are secured by properties located in the state of Washington.

Commercial and multi-family real estate loans are generally priced at a higher rate of interest than one-to-four family residential loans, to compensate for the greater risk associated with higher loan balances and the complexity of underwriting and monitoring these loans. Repayment on loans secured by commercial or multi-family properties is dependent on successful management by the property owner to create sufficient net operating income to meet debt service requirements. Changes in economic and real estate market conditions can affect net operating income, capitalization rates, and ultimately the valuation and marketability of the collateral. As a result, we analyze market data including vacancy rates, absorption percentages, leasing rates, and competing projects under development. Interest rate, occupancy and capitalization rate stress testing are required as part of our underwriting analysis. If the borrower is a corporation, we generally require and obtain personal guarantees from principals, which include underwriting of their personal financial statements, tax returns, cash flows and individual credit reports, to provide us with additional support and a secondary source for repayment of the debt.

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We offer both fixed- and adjustable-rate loans on commercial and multi-family real estate, which may include balloon payments. As of December 31, 2025, we had $276.1 million in adjustable-rate commercial real estate loans, or 65.1% of commercial real estate, and $192.9 million in adjustable-rate multi-family loans, or 66.1% of total multi-family. Commercial and multi-family real estate loans with adjustable rates generally adjust after an initial period of three to five years and have maturity dates of three to ten years. Amortization terms are generally limited to terms up to 25 years on commercial real estate loans and up to 30 years on multi-family loans. Adjustable-rate multi-family residential and commercial real estate loans are generally priced to market indices with appropriate margins, which may include The Wall Street Journal prime rate, the U.S. Constant Maturity Treasury Rate, Term Secured Overnight Financing Rate ("TSOFR"), or a similar term FHLB borrowing rate. Adjustable-rate loans could have increased credit risk when interest rates rise. An increase to the borrower's loan payment may affect the borrower's ability to repay and could increase the probability of default. To mitigate this risk to both the borrower and First Fed, adjustable-rate loans may contain both periodic and lifetime interest rate caps, limiting the amount of payment changes.

Of the adjustable-rate commercial and multi-family real estate loans, 66.01% are subject to a floor rate and the weighted average floor rate on these loans was 3.66% at December 31, 2025. Of the adjustable-rate commercial loans, 28.51% are subject to a ceiling rate and the weighted average ceiling rate on those loans was 16.42% at December 31, 2025.

The maximum loan-to-value ratio for commercial and multi-family real estate loans is typically limited to 75% of an appraiser opinion of market value. The minimum debt service coverage ratio is 1.25 for non-owner-occupied and 1.20 for owner-occupied properties. We require independent appraisals or evaluations at origination on all loans secured by commercial or multi-family real estate from our internal list of approved appraisers.

We review most commercial real estate and multi-family loan relationships annually to ensure the borrower continues to meet certain loan requirements as set forth in loan covenants, which may include an annual inspection of the property. The scope of the annual review is generally based on relationship size, with those $1.5 million or greater subject to a full credit review, which includes detailed financial and cash flow analysis, property inspection, covenant compliance and annual risk rating certification. All commercial loans risk rated special mention or worse with exposure of $100,000 or more are also subject to the full credit review. Relationships with an aggregate credit exposure below $1.5 million are monitored for payment performance, changes in guarantor credit scores, and compliance with all other terms and conditions contained in the loan documents. All individuals that guarantee $3.0 million or more in aggregate commercial debt of any type are subject to annual financial reviews. Relationships with an aggregate credit exposure below $750,000 that have been paid as agreed for at least three years are exempt from the annual requirement, so long as the Borrower remains in compliance with all other terms and conditions noted in the loan documents. While we cannot prevent loans from becoming delinquent, we believe our monitoring and formal review processes provide us with the opportunity to better identify problem loans in a timely manner and to work with the borrower prior to the loan becoming delinquent.

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The following table provides information on multi-family and commercial real estate loans by type at the dates indicated:

December 31, 2025

December 31, 2024

(dollars in thousands)

Amount

Percent

Amount

Percent

Non-owner occupied

Multi-family

$
288,529

41.7
%

$
332,596

46.0
%

Hospitality

64,751

9.4

63,611

8.8

Retail

48,088

7.0

51,065

7.1

Office building

42,193

6.1

50,819

7.0

Health care

32,003

4.6

19,027

2.6

Mixed use

20,411

3.0

20,772

2.9

Condominium

17,495

2.5

17,725

2.5

One-to-four family

10,686

1.5

9,877

1.4

Warehouse

6,932

1.0

7,114

1.0

Vehicle dealership

974

0.1

1,004

0.1

Other non-owner occupied

44,036

6.4

33,241

4.6

Total non-owner occupied

576,098

83.3

606,851

84.0

Owner occupied

Health care

21,473

3.1

22,139

3.1

Office building

17,329

2.5

16,356

2.3

Mixed use

11,882

1.7

10,460

1.4

Retail

11,191

1.6

10,578

1.5

Vehicle dealership

9,488

1.4

10,229

1.4

One-to-four family

8,921

1.3

4,567

0.6

Warehouse

6,761

1.0

14,078

1.9

Hospitality

669

0.1

793

0.1

Condominium

374

0.1

789

0.1

Other owner-occupied

27,026

3.9

26,135

3.6

Total owner occupied

115,114

16.7

116,124

16.0

Summary by type

Multi-family

288,529

41.7

332,596

46.0

Hospitality

65,420

9.5

64,404

8.9

Office building

59,522

8.6

67,175

9.3

Retail

59,279

8.6

61,643

8.6

Health care

53,476

7.7

41,166

5.7

Mixed use

32,293

4.7

31,232

4.3

One-to-four family

19,607

2.8

14,444

2.0

Condominium

17,869

2.6

18,514

2.6

Warehouse

13,693

2.0

21,192

2.9

Vehicle dealership

10,462

1.5

11,233

1.5

Other non-owner occupied

44,036

6.4

33,241

4.6

Other owner-occupied

27,026

3.9

26,135

3.6

Total multi-family and commercial real estate

$
691,212

100.0
%

$
722,975

100.0
%

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If we foreclose on a commercial or multi-family real estate loan, the marketing and liquidation period can be a lengthy process with substantial holding costs. Vacancies, deferred maintenance, repairs and market factors can result in losses during the time it takes to prepare the property for sale. Depending on the individual circumstances, initial charge-offs and subsequent losses relating to multi-family and commercial loans can be substantial and unpredictable.

The average outstanding loan amount in our commercial real estate portfolio, including multi-family loans, was $1.6 million as of December 31, 2025. We generally target individual commercial and multi-family real estate loans between $1.0 million and $10.0 million to small and mid-size operators and investors in our market areas as well as other parts of Washington. We typically require a pre-existing relationship with the borrower in order to originate commercial and multi-family real estate loans for properties located in other states.

Our three largest commercial and multi-family borrowing relationships, including current loan balances and unused commitments, at December 31, 2025 consisted of a $19.8 million relationship secured by multi-family real estate in Pierce and Snohomish Counties, Washington; a $19.1 million relationship secured by multi-family real estate in Pierce County, Washington; and a $17.2 million relationship secured by construction and multi-family real estate in King County, Washington. The construction loan balances are included in Construction and Land Lending below.

Construction and Land Lending. Our construction and land loans totaled $61.3 million, or 3.8% of the total loan portfolio at December 31, 2025 and the undisbursed portion of construction loans in process totaled $49.5 million.

First Fed offers an "all-in-one" residential custom construction loan product, which upon completion of construction may be held in our loan portfolio. We also originate construction loans for certain commercial real estate projects. These projects include, but are not limited to, subdivisions, multi-family, retail, office, warehouse, hotel, and office buildings. We also offer commercial acquisition-renovation loans that have a small construction component combined with a traditional real estate loan. Underwriting criteria on construction loans include, but are not limited to, minimum debt service coverage requirements of 1.25x or better, loan-to-value limitations, pre-leasing requirements, construction cost over-run contingency reserves, interest and absorption period reserves, occupancy, capitalization rates and interest rate stress testing, as well as other underwriting criteria. Underwriting criteria on commercial acquisition-renovation loans during the interest-only period include, but are not limited to, loan-to-value limitations and debt service coverage requirements of 1.00x or better, based on in-place rents and payment amortization of full commitment. These loans begin amortizing once renovations have been completed.

Construction loan applications generally require architectural and working plans, a material specifications list, a detailed cost breakdown and a construction contract. Custom and speculative construction valuations assume that the project will be built in accordance with plans and specifications submitted to us at the time of the loan application. The appraiser takes into consideration the proposed design and market appeal of the improvements, based on current market conditions and demand for homes, although the improvements may not be completed for twelve months or longer, depending on the complexity of the plans and specifications and market conditions.

Construction loan advances are based on progress payments for "work in place" based on detailed line-item construction budgets. Independent construction inspectors are used to evaluate the construction draw request relative to the progress. Our construction administrators review all construction projects, inspection reports, and construction loan advance requests to ensure they are appropriate and in compliance with all loan conditions. Other risk management tools include title insurance, date down endorsements or periodic lien inspections prior to the payment of construction loan advances. In some cases, general contractors may be required to provide sub-contractor lien releases for any work performed prior to the filing of our deed of trust or prior to each construction loan advance.

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Table of Contents

Land acquisition, development and construction loans are available to local contractors and developers for the purpose of holding and/or developing residential building sites and homes when market conditions warrant such activity. Land acquisition loans are secured by a first lien on the property and are generally limited to 65% of the acquisition price or the appraised value, whichever is less. Development land loans are generally limited to 75% of the discounted appraised value based on the projected lot sale absorption rate and associated carry and liquidation costs of the developed lots and homes. Underwriting criteria for acquisition and development loans include evidence of preliminary plat approval, and a review of compliance with state and Federal environmental protection and disclosure laws, engineering plans, detailed cost breakdowns and marketing plans. Other risk management tools include acquisition of title insurance and review of feasibility and market absorption reports. These loans have been limited to projects within the state of Washington.

At December 31, 2025, the average construction commitment was $629,000 for single-family residential construction, $4.4 million for multi-family construction and $3.0 million for commercial real estate construction. The largest construction commitments for single-family residential, multi-family and commercial real estate were $2.5 million, $7.4 million and $12.6 million, respectively, at December 31, 2025.

Substantially all of our adjustable-rate land acquisition, development and construction lending have rates of interest based on The Wall Street Journal prime rate. During the term of construction, the accumulated interest on the loan is either billed monthly, as is the case for acquisition and development loans, or added to the principal of the loan through an interest reserve. When original interest reserves set up at origination are exhausted, no additional reserves are permitted unless the loan is re-analyzed and it is determined that the additional reserves are appropriate.

The success of land acquisition, development and construction lending is dependent upon completion of the project and the sale or leasing of the property for repayment of the loan. Because of the uncertainties inherent in the estimates related to construction costs, the market value of the completed project, the demand for the property at completion, market conditions, the rates of interest paid, and other factors, actual results are difficult to predict and variations from expectations can have a significant adverse effect on a borrower's ability to repay loans and the value and marketability of the underlying collateral. In addition, because an incomplete construction project is difficult to sell in the event of default, we may be required to advance additional funds and/or contract with another builder in order to complete construction. There is a risk that we may not fully recover unpaid loan funds and associated construction and liquidation costs under these circumstances. Speculative construction loans carry additional risk associated with identifying an end-purchaser for the finished project. Our extension fee policy encourages commercial borrowers to finish projects on time, which we believe mitigates risk and enhances the return on these loans.

We also originate individual lot loans, which are secured by a first lien on the property, for borrowers who are planning to build on the lot within the next five years. Generally, these loans have a maximum loan-to-value ratio of 75% for improved lands (legal access, water and power). The interest rate on these loans is fixed with a 20-year amortization and a five-year term.

At the dates indicated, the composition of our construction and land portfolio was as follows:

(dollars in thousands)

December 31, 2025

December 31, 2024

One-to-four family residential

$
21,954

$
38,900

Multi-family residential

10,109

15,401

Commercial real estate

23,005

17,282

Land

6,200

6,527

Total construction and land

$
61,268

$
78,110

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Our construction and land loans are geographically disbursed primarily throughout the state of Washington and, as a result, these loans are susceptible to risks that may be different depending on the location of the project. We manage our construction lending by utilizing a licensed third-party vendor to assist us in monitoring our higher-risk construction projects while lower-risk projects are monitored by internal staff.

The following tables show our construction commitments by type and geographic concentration at the dates indicated:

(dollars in thousands)

Olympic Peninsula

Puget Sound Region

Other Washington

California

Total

December 31, 2025

Construction Commitment

One-to-four family residential

$
5,460

$
40,189

$
1,081

$
—

$
46,730

Multi-family residential

3,900

18,153

—

—

22,053

Commercial real estate

480

21,855

4,214

9,706

36,255

Total commitment

$
9,840

$
80,197

$
5,295

$
9,706

$
105,038

Construction Funds Disbursed

One-to-four family residential

$
1,857

$
21,045

$
695

$
—

$
23,597

Multi-family residential

2,842

7,449

—

—

10,291

Commercial real estate

56

15,418

3,177

2,975

21,626

Total disbursed for construction

4,755

43,912

3,872

2,975

55,514

Net deferred fees (costs)

20

(441
)

2

(26
)

(445
)

Amortized cost for construction

$
4,775

$
43,471

$
3,874

$
2,949

$
55,069

Undisbursed Commitment

One-to-four family residential

$
3,603

$
19,144

$
386

$
—

$
23,133

Multi-family residential

1,058

10,704

—

—

11,762

Commercial real estate

424

6,437

1,037

6,731

14,629

Total undisbursed

$
5,085

$
36,285

$
1,423

$
6,731

$
49,524

Land Funds Disbursed

One-to-four family residential

$
1,929

$
1,792

$
121

$
—

$
3,842

Commercial real estate

1,147

1,158

—

—

2,305

Total disbursed for land

3,076

2,950

121

—

6,147

Net deferred fees

28

21

3

—

52

Amortized cost for land

$
3,104

$
2,971

$
124

$
—

$
6,199

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(dollars in thousands)

Olympic Peninsula

Puget Sound Region

Other Washington

Total

December 31, 2024

Construction Commitment

One-to-four family residential

$
6,897

$
45,945

$
1,424

$
54,266

Multi-family residential

3,900

14,828

5,695

24,423

Commercial real estate

500

40,259

4,215

44,974

Total commitment

$
11,297

$
101,032

$
11,334

$
123,663

Construction Funds Disbursed

One-to-four family residential

$
1,769

$
35,711

$
1,424

$
38,904

Multi-family residential

709

10,245

4,582

15,536

Commercial real estate

99

16,508

900

17,507

Total disbursed for construction

2,577

62,464

6,906

71,947

Net deferred fees (costs)

2

(329
)

(37
)

(364
)

Amortized cost for construction

$
2,579

$
62,135

$
6,869

$
71,583

Undisbursed Commitment

One-to-four family residential

$
5,128

$
10,234

$
—

$
15,362

Multi-family residential

3,191

4,583

1,113

8,887

Commercial real estate

401

23,751

3,315

27,467

Total undisbursed

$
8,720

$
38,568

$
4,428

$
51,716

Land Funds Disbursed

One-to-four family residential

$
2,349

$
2,183

$
213

$
4,745

Commercial real estate

900

845

—

1,745

Total disbursed for land

3,249

3,028

213

6,490

Net deferred fees

18

14

5

37

Amortized cost for land

$
3,267

$
3,042

$
218

$
6,527

Consumer Lending. We offer consumer loans, including home equity loans, home equity lines of credit and personal lines of credit. At December 31, 2025, home equity loans and lines of credit totaled $85.1 million, or 5.2%, of the loan portfolio. Our interest rates on home equity loans are priced based on risks including credit score, loan-to-value and overall payment capacity of the applicant. Home equity loans are made for the improvement of residential properties and other purposes. Some of these loans are secured by first liens; however, the majority of these loans are secured by a second deed of trust on the residential property. Fixed rate, fully amortizing home equity loans in first lien position are available with repayment periods ranging from 5 to 20 years. We also offer a ten-year home equity line of credit to qualifying borrowers, which includes an option for a discounted initial fixed interest rate for the first year with the interest rate adjusting monthly thereafter based on a margin over the prime rate; payments are interest-only during the ten-year draw period. The balance and rate are fixed after that period and the principal amortized over the remaining fifteen-year period of the loan. Options for equity loans on non-owner occupied properties are offered under more conservative requirements. Additionally, terms are available under a bridge loan product consisting of a short-term equity loan used to facilitate the acquisition of a separate residential property. Home equity fixed and line of credit products in second lien positions behind a non-First Fed mortgage have a maximum loan amount of $250,000. Home equity loans and lines of credit have greater risk than one-to-four family residential mortgage loans because they are secured by mortgages subordinated to the existing first mortgage on the property. We may or may not have private mortgage insurance coverage.

At December 31, 2025, auto loans totaled $146.7 million, of which $146.2 million were purchased. The remaining $545,000 were originated through our First Fed branches. Auto loans have a maximum term of up to 180 months for purchased classic or collector vehicles and up to 84 months for all other auto loans, depending on the age and condition of the vehicle and strength of the borrower. Loan rates for auto lending, as well as all other consumer loans, are priced based on the specific loan type and the risks involved. First Fed utilizes indirect lending sources to purchase auto loans. In-house and direct lending sources have been used to originate auto loans in prior years.

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We purchase auto loans through a relationship with Woodside Credit, LLC, a loan originator that operates in all 50 states, underwriting and funding loans for classic (25 years or older) and collector (premium price with limited production) vehicles. At December 31, 2025, $137.7 million of Woodside auto loans was included in consumer loans. These loans typically range from $10,000 to over $600,000 with terms that range from 84 to 180 months and generally require down payments of 10% to 20% of the cost of the vehicle. We receive loan pools each week with complete packages that we underwrite to determine whether to purchase or pass on the loans submitted. The average loan balance was $101,000 at December 31, 2025. These loans present unique risks with the collateral being located across the country; however, our loan originator mitigates risk of loss by providing an option to facilitate the collection efforts should repossession become necessary, for which we would incur a cost if we did it ourselves. Historically, losses on these types of loans have been less than 2% and First Fed experienced a loss rate of 1.18% and 0.36%, respectively, for each of the years ended December 31, 2025 and 2024.

We have also purchased auto loans through a partnership with First Help Financial, a loan originator that operates in selected states, underwriting and funding loans to "superior subprime" customers who have a demonstrated capacity to pay and have limited or no blemishes on their credit report, but have limited credit experience. At December 31, 2025, $8.5 million of First Help auto loans was included in consumer loans. Loans in the First Help Auto Loan Purchase Program typically range from $10,000 to $75,000 with terms that range from 72 to 84 months. We received loan pools with complete packages that we underwrote to determine whether to purchase or pass on the loans submitted. The seller retains the servicing on these loans, including collection activities as well as the rehab and marketing related to the sale of any collateral that was repossessed or foreclosed upon.

We purchase manufactured home loans through a partnership with Triad Financial Services, a loan originator that underwrites and funds these loans. At December 31, 2025, $132.3 million of manufactured home loans was included in consumer loans. These loans range from $18,000 to $425,000 with terms that range from 84 to 360 months. Loans are submitted on a weekly flow basis or as one-off pools. All loans are considered "full document" and complete packages are reviewed to determine if the loan will be purchased or not. The seller retains the servicing on these loans which includes the collection activities as well as the rehab and marketing related to the sale of any collateral that was repossessed or foreclosed upon. The collateral for these loans is generally personal property; however, loans where the title to the manufactured home has been permanently attached to a land parcel also include real estate collateral. The program has a credit enhancement in the form of a reserve account that can be used to protect the bank from charge offs and prepayments. The reserve account, which is held in a limited-access controlled deposit account at First Fed, represented 5.4% of related loan balances at year end. The funding of the reserve account will vary depending on the pricing options selected during the acquisition of the loans. First Fed had five loans placed into repossession inventory in 2025 and three in 2024 for a variety of reasons. The Bank was made whole through the credit enhancement reserve for all loans placed into repossession inventory.

Prior to September 2023, we purchased unsecured consumer loans through a partnership with Splash Financial who underwrote and funded these loans. We received individual loan packages that we underwrote to determine whether to purchase or pass on. The seller retained the servicing on these loans. At December 31, 2025, $1.2 million of purchased unsecured loans was included in consumer loans. Loans purchased between June 2022 and March 2023 ranged from $1,000 to $35,000 with terms that ranged from 36 to 60 months. Of the $11.1 million in loans purchased under the original program participation criteria, First Fed has experienced losses totaling $5.0 million. The originator paid First Fed $950,000 as a partial reimbursement of program losses incurred during 2023. Changes were made to the program participation criteria in April 2023 to reduce future losses, including a decrease in the maximum loan amount from $35,000 to $20,000 and an increase to the minimum FICO score. Splash also agreed to cover first payment defaults over 1.75% and the servicing fee charged to the Bank on new loans was reduced. The Bank purchased $3.7 million of loans after the change in criteria was made and has experienced losses totaling $778,000 related to this group of loans. Purchases of Splash loans were suspended in August 2023.

Consumer loans represent additional risks because of the mobility and rapidly depreciating nature of consumer assets in contrast to real estate-based collateral. If a borrower defaults, repossession and liquidation of the collateral may not provide sufficient proceeds to satisfy the outstanding loan balance. Other factors that may account for potential loan losses on consumer loans include deferred maintenance and damages. While subsequent legal actions and judgments against borrowers in default may be appropriate, such collection efforts and costs may not always be warranted and are evaluated on a case-by-case basis. Consumer loan collections are dependent on the borrower’s continuing financial stability and federal and state laws, including federal and state bankruptcy and insolvency laws, which may limit the amount that can be recovered on these loans.

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Table of Contents

Commercial Business Lending. As of December 31, 2025, commercial business loans totaled $130.3 million, or 8.0% of our loan portfolio.

Commercial business loans include lines of credit, term loans, and letters of credit used for general business purposes, including seasonal and permanent working capital, equipment financing, and general investments. These loans are typically secured by business assets, and loan terms vary from one to seven years with either adjusting or floating rates indexed to similar FHLB advance rates, The Wall Street Journal prime rate, TSOFR or other indices. These loans typically have shorter maturity terms and higher interest spreads than real estate loans but generally involve more credit risk because of the type and nature of the collateral. Our commercial business lending underwriting includes an analysis of the borrower’s financial condition, past, present and future cash flows, and the collateral pledged as security. We generally obtain personal guarantees on our commercial business loans. We focus our commercial lending activities on small-to-medium sized, privately held companies with local or regional businesses that operate in our market area.

Commercial business loans are originated based on the cash flow of the borrowing entity, which may be unpredictable due to normal business cycles, industry changes, and economic and political conditions. Secondary and tertiary sources of repayment are guarantor cash flows and collateral liquidation. Collateral for commercial business loans most often consists of real estate, accounts receivable, inventory, or equipment. Collateral may fluctuate in value, which can reduce liquidation proceeds, and our ability to collect on accounts receivable or other third-party payments can affect the amount of losses we incur in the event of default. All borrowers with aggregate exposure of $750,000 or greater are subject to annual financial reviews and risk rating certification. All commercial loans risk rated special mention or worse with exposure of $100,000 or more are also subject to the full credit review. Relationships with an aggregate credit exposure below $750,000 are monitored for payment performance, changes in guarantor credit scores, and compliance with all other terms and conditions contained in the loan documents. All individuals that guarantee $3.0 million or more in aggregate commercial debt of any type are subject to annual financial reviews.

We purchase unsecured commercial loans to small businesses and professionals through a partnership with Bankers Healthcare Group, who underwrites and funds these loans. At December 31, 2025, $21.6 million of purchased loans were included in commercial business loans. These loans range from $24,000 to $530,000 with terms ranging from 60 to 144 months. We purchase individual loans on a flow basis that we underwrite to determine whether they fit our credit criteria. The seller retains the servicing on these loans. A reserve account, which is held in a limited-access controlled deposit account at First Fed, equal to approximately 3% of the unpaid balance serves as a credit enhancement to help protect against charge offs and prepaid loans. The loan originator has experienced a loss rate of 2.9% on the total portfolio of loans in this program. First Fed has not experienced any losses on these loans to-date.

First Fed periodically provides funding to Northpointe Bank through participation in their Northpointe Bank Mortgage Purchase Program ("Northpointe MPP"). At December 31, 2025, a participation balance of $18.9 million was included in commercial business loans. The Northpointe MPP provides short-term advances to well-qualified mortgage companies throughout the U.S. These advances provide gap financing for the period between when a loan funds and when it is purchased by the end investor. This typically ranges from 15 to 25 days. Under the Northpointe MPP, each advance is secured by individual mortgages funded by participating community bank partners, including First Fed. Once the loan is purchased by the end investor, funds are sent directly to Northpointe Bank who, in turn, disburses it out to the partner banks on a pro rata basis. Only prime, first lien residential mortgage products which are agency eligible (such as Fannie Mae, Freddie Mac, or the Department of Veterans Affairs) are included in the program. Northpointe Bank underwrites all the loans entering into the program to ensure conformity with program and investor requirements. The Bank's participation level in this program fluctuates, with a maximum daily limit of $20.0 million at December 31, 2025. The daily limit is periodically evaluated and adjusted to align with strategic goals.

Loan Origination and Underwriting. Our loans are obtained from a variety of sources, including existing or walk-in customers, business development, referrals, and advertising, among others. All our consumer loan products, including residential mortgage loans and secured and unsecured consumer loans, are processed through our centralized processing and underwriting center. Commercial business loans, including commercial and multi-family real estate loans, are originated by our relationship managers ("RMs") and underwritten centrally with credit presentations submitted for approval to the appropriate individuals and committee(s) with lending authority designated by the Board of Directors (the "Board").

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Table of Contents

Lending Authority. Through its current policy, the Board delegates lending authority to the Bank’s management and staff and to the Senior Loan Committee ("SLC"). Overdrafts require one signature. The Chief Banking Officer ("CBO") and the Chief Operating Officer ("COO") have the authority to approve overdrafts up to $100,000; the Chief Credit Officer ("CCO"), Chief Financial Officer ("CFO"), and Chief Executive Officer ("CEO") have the authority to approve overdrafts up to $250,000; and certain other staff and management have authority to approve overdrafts ranging from $5,000 to $50,000.

Mortgage loan underwriters have approval authority ranging from $250,000 for Junior Underwriters up to $850,000 for Senior Underwriters. The Director of Mortgage and Consumer Credit has approval authority of $2.0 million, and the CCO has approval authority of $3.0 million. Mortgage loans over $3.0 million are approved by the SLC.

For commercial loans, the CCO has approval authority of $10.0 million based on aggregate credit exposure, and other personnel have approval authority ranging from $500,000 to $4.0 million. Commercial loan relationships over $10.0 million are approved by the SLC.

The Director of Mortgage and Consumer Credit has approval authority for consumer loans up to $1.0 million and certain roles have authority ranging from $150,000 to $500,000. Additionally, we have assigned authority to approve indirect auto loans and wholesale partnerships meeting our underwriting and pricing criteria to our third-party service providers.

The SLC (on a monthly basis) and the Board Loan Committee ("BLC") (on a quarterly basis) review loan portfolio quality, credit concentrations, production, and industry trends and provide directional oversight over our lending policies. The BLC also reviews policy exceptions and related risk concerns on a quarterly basis. Additionally, all loan approval policies are reviewed no less than annually.

Washington law imposes loans to one borrower restrictions limiting total loans and extensions of credit by a bank to 20% of its unimpaired capital and surplus, resulting in a legal limit of $43.2 million at December 31, 2025. First Fed, however, restricts its loans to one borrower to no more than 75% of the Bank's lending limit, unless specifically approved by the SLC as an exception to policy. The Bank's lending limit is adjusted quarterly and was $40.5 million at December 31, 2025. The following table provides a summary of our five largest relationships at December 31, 2025.

Total Commitment

Number of Loans in Relationship

Primary Collateral Type

(dollars in thousands)

$19,846

10

Multi-family Real Estate

19,063

2

Multi-family Real Estate

17,210

3

Commercial Construction

16,340

2

Multi-family Real Estate

16,308

3

Multi-family Real Estate

Loan Originations, Servicing, Purchases and Sales. We originate mortgage, consumer, multi-family and commercial real estate, and commercial business loans for our portfolio utilizing fixed- and adjustable-rate loan terms. During the years ended December 31, 2025 and 2024, our total loan originations were $213.1 million and $232.4 million, respectively.

We purchase whole and participation loans on a servicing retained or released basis. During the years ended December 31, 2025 and 2024, we purchased $77.9 million and $88.9 million of loans, respectively. During the last year, the majority of purchases consisted of auto loans purchased through our partnership with an originator specializing in classic and collector vehicles, manufactured home loans purchased through our partnership with an originator specializing in that type of lending, and unsecured commercial business loans to borrowers primarily in the healthcare industry. A secondary source of purchased loans has been commercial real estate loans and participations, whereby we receive a portion of a loan originated by another lender who retains the servicing and customer relationship and may, depending on the terms of the agreement, retain a portion of the interest as a servicing fee. Purchased loans, loan pools, and participations are underwritten by our credit administration department and approved by the appropriate loan committee(s) prior to purchase, according to our lending authority guidelines. We may pay a purchase premium or receive a purchase discount on fully originated loans that we purchase. Premiums and discounts are capitalized at the time of purchase and amortized over the remaining contractual life of the loan. We had $22.1 million and $20.4 million of net premiums paid on purchased loans at December 31, 2025 and 2024.

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Table of Contents

The Olympic Peninsula region, which includes a substantial concentration of our depositors, has experienced limited population growth, and the region's unemployment rate is higher than both the state and national unemployment rates. As a result, it has been part of our strategy to originate and purchase loans outside of these areas in the counties surrounding the Puget Sound and elsewhere. As part of that strategy, we may purchase loans with different credit and underwriting criteria than those we originate directly.

We also sell residential first mortgage loans in the secondary market. The Bank has historically focused on originating fixed-rate residential mortgages, which we may sell to the secondary market to manage our interest rate risk and improve noninterest income. During the years ended December 31, 2025 and 2024, we sold $24.6 million and $22.5 million of residential mortgage loans, respectively. Our secondary market relationship for residential loans is with Freddie Mac and other select third-party investors, which provides us with greater flexibility in choosing the best pricing, whether we are selling on a servicing retained or released basis.

At December 31, 2025, we were servicing $301.6 million of loans which we originated and subsequently sold the principal to others. We earned servicing income on these loans of $705,000, and $736,000 for the years ended December 31, 2025 and 2024, respectively. Servicing rights for these loans had a fair value of $3.0 million at December 31, 2025. See Note 7 of the Notes to Consolidated Financial Statements included in Item 8, "Financial Statements and Supplementary Data," of this Form 10-K.

In general, loans are sold on a non-recourse basis to third-party purchasers, subject to a provision for repurchase in the event of a breach of representation, warranty or covenant made at the time of sale. During fiscal 2008, we sold loans with "life of the loan" recourse provisions to Freddie Mac, and beginning in May 2013, Freddie Mac has required loans guaranteed by the United States Department of Agriculture to be sold with "life of the loan" recourse provisions as well. These recourse provisions require us to repurchase the loan upon default. The balance of loans serviced for others with life of the loan recourse provisions was $1.2 million at December 31, 2025. There were no loans repurchased during the years ended December 31, 2025 and 2024.

We may solicit one or more financial institutions to take a portion of a commercial real estate loan to manage risk, concentrations, or to generate income through gain on sale or servicing fees. In that case, a participation agreement outlines the indirect relationship between the Bank and the participant regarding borrower access, loan servicing, loan documentation, and other matters. The participant's involvement is typically limited, and the participation interest is generally sold without recourse. We typically retain an ownership interest in the loan as well as the loan servicing rights to maintain our direct relationship with the borrower and better manage our credit risk. During the year ended December 31, 2025, we sold one commercial business loan and one commercial construction loan. We also participated out 58% of another construction loan, retaining the servicing. No commercial real estate loans were sold or participated during the year ended December 31, 2024.

We partner with the Small Business Administration ("SBA") to originate loans through their 7(a) and 504 programs. SBA 7(a) loans generally carry a government guarantee ranging from 75%-90% of the loan balance. The Bank's intent is to sell the guaranteed portion and hold the remaining unguaranteed portion of the note. The Bank retains the servicing on these loans. We originated SBA loans totaling $349,000 but did not participate out any of the balances during the year ended December 31, 2025. We originated SBA loans totaling $4.8 million and sold $3.0 million of SBA participations during the year ended December 31, 2024.

Gains, losses and transfer fees on sales of one-to-four family and commercial real estate loans are recognized at the time of the sale. Our net gain on sale of residential real estate, commercial real estate, and SBA loans was $112,000 and $312,000 for the years ended December 31, 2025 and 2024, respectively.

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Table of Contents

The following table shows total loans originated, purchased, sold, repaid and other changes for the periods indicated:

Year Ended December 31,

(dollars in thousands)

2025

2024

Originations by type:

Fixed-rate:

One-to-four family

$
25,950

$
21,873

Commercial real estate

2,054

3,257

Construction and land

829

657

Home equity

6,690

6,670

Auto and other consumer

367

491

Commercial business

5,978

8,275

Total fixed-rate

41,868

41,223

Adjustable-rate:

One-to-four family

6,407

2,097

Multi-family

2,638

13,598

Commercial real estate

51,253

31,386

Construction and land

56,721

64,253

Home equity

34,641

30,964

Auto and other consumer

813

567

Commercial business

18,722

48,258

Total adjustable-rate

171,195

191,123

Total loans originated

213,063

232,346

Purchases by type:

One-to-four family

550

—

Multi-family

46

107

Commercial real estate

53

—

Commercial business

2,327

9,623

Auto

62,442

49,826

Manufactured homes

12,440

29,294

Total loans purchased

77,858

88,850

Sales and Repayments:

One-to-four family sold

24,575

22,478

Multi-family sold

—

—

Commercial business sold

6,480

—

Total loans sold

31,055

22,478

Total principal repayments, charge-offs and transfers to real estate owned and repossessed assets

329,939

267,290

Total reductions

360,994

289,768

Net loan activity

$
(70,073
)

$
31,428

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Table of Contents

Loan Origination and Other Fees. Loan origination fees paid by borrowers generally are based on a percentage of the principal amount of the loan. Accounting standards require that certain fees received, net of certain origination costs, be deferred and amortized over the contractual life of the loan. Net deferred fees or costs associated with loans that are prepaid or sold are recognized as income or expense at the time of prepayment or sale. Net deferred loan fees included in net loans receivable on the balance sheet totaled $551,000 and $1.3 million at December 31, 2025 and 2024, respectively. In addition to deferred loan fees, we receive other fee income on loan commitments, late payments and miscellaneous services.

Asset Quality

Management of asset quality includes loan performance monitoring and reporting as well as utilization of both internal and independent third-party loan reviews. The primary objective of our loan review process is to measure borrower performance and assess risk for the purpose of identifying loan weakness to minimize loan loss exposure. From the time of origination through final repayment, all loans are assigned a risk rating based on pre-determined criteria. The risk rating is monitored annually for most loans and may change during the life of the loan as appropriate.

Loan reviews vary by loan type and complexity. Some loans may warrant detailed individual review, while other loans may have less risk based upon size, or be of a homogeneous nature, such as consumer loans and loans secured by residential real estate. Homogeneous loans may be reviewed based on indicators such as delinquency or credit rating. In cases of significant concern, re-evaluation of the loan and associated risks are documented by completing a loan risk assessment and action plan.

The following table shows our delinquent loans by type of loan and number of days delinquent as of December 31, 2025.

Loans Delinquent For:

60-89 Days

90 Days and Over

Total Loans Delinquent 60 Days or More

(dollars in thousands)

Number

Amount

Percent of Loan Category

Number

Amount

Percent of Loan Category

Number

Amount

Percent of Loan Category

Real estate loans:

One-to-four family

3

$
1,288

0.3
%

2

$
523

0.1
%

5

$
1,811

0.5
%

Construction and land

—

—

—

3

5,146

8.4

3

5,146

8.4

Total real estate loans

3

1,288

0.1

5

5,669

0.5

8

6,957

0.6

Consumer loans:

Home equity

—

—

—

1

53

0.1

1

53

0.1

Auto and other consumer

18

528

0.2

11

1,062

0.4

29

1,590

0.6

Total consumer loans

18

528

0.1

12

1,115

0.3

30

1,643

0.4

Commercial business loans

1

2,686

2.1

9

270

0.2

10

2,956

2.3

Total delinquent loans

22

$
4,502

0.3
%

26

$
7,054

0.4
%

48

$
11,556

0.7
%

Nonperforming Assets. Nonperforming assets include nonperforming loans, real estate owned, and other repossessed assets. Also presented below are totals, regardless of accrual status, for modified loans to troubled borrowers ("MLTB"). Nonperforming assets as a percentage of total assets were 1.1% and 1.4% at December 31, 2025 and 2024, respectively. At each of the dates indicated in the following table, there were no loans delinquent more than 90 days that were accruing interest.

The decrease in nonperforming loans during 2025 was primarily due to payments received followed by the sale of the $8.1 million commercial construction project placed on nonaccrual status in 2024. Other decreases from payment and charge-off activity were offset by loans that transitioned into nonaccrual status during 2025. The increase in nonperforming loans during 2024 primarily resulted from an $8.1 million commercial construction project which the Bank believes does not represent significant exposure to loss based on a recent third-party appraisal. The loan was placed on nonaccrual status and downgraded to a classified loan status, in line with applicable Bank policy.

23

Table of Contents

The following table summarizes our nonperforming assets at the dates indicated:

(dollars in thousands)

December 31, 2025

December 31, 2024

Nonaccrual loans:

One-to-four family

$
2,272

$
1,477

Commercial real estate

9,745

5,598

Construction and land

5,146

19,544

Total real estate loans

17,163

26,619

Home equity

53

55

Auto and other consumer

1,086

700

Total consumer loans

1,139

755

Commercial business loans

4,293

3,141

Total nonaccrual loans

22,595

30,515

Real estate owned:

Construction and land

1,380

—

Total nonperforming assets

$
23,975

$
30,515

MLTB loans:

Multi-family

$
4,531

$
—

Commercial real estate

9,741

6,402

Commercial business

7

111

Total restructured loans

$
14,279

$
6,513

Nonaccrual loans as a percentage of total loans

1.4
%

1.8
%

Nonperforming MLTB loans included in total nonaccrual loans and total restructured loans above

$
9,748

$
111

For the years ended December 31, 2025 and 2024, gross interest income which would have been recorded had the nonaccrual loans been current in accordance with their original terms amounted to $4.3 million and $2 million, respectively. The amount that was included in interest income on a cash basis on nonaccrual loans was $132,000 and $201,000 for the years ended December 31, 2025 and 2024, respectively.

Other Loans of Concern. In addition to nonperforming assets set forth in the table above, as of December 31, 2025, there were 45 loans totaling $29.9 million that continue to accrue interest but for which management has concerns about the ability of these borrowers to comply with loan repayment terms. These loans are classified as special mention or substandard.

Real Estate Owned and Repossessed Property. Real property we acquire through collection and foreclosure efforts is classified as real estate owned. These properties are recorded at the lower of cost, which is the unpaid principal balance of the related loan, or the fair market value of the property less selling costs. Real estate owned properties are generally listed with a real estate broker, included in the multiple listing service, and actively marketed. Other repossessed property, including automobiles, is also recorded at the lower of cost or fair market value less selling costs. As of December 31, 2025, we had $1.4 million of repossessed real property owned and no personal property.

Restructured Loans. According to U.S. Generally Accepted Accounting Principles ("GAAP"), we are required to account for certain loan modifications or restructurings as a MLTB. In general, the modification or restructuring of a debt is considered a MLTB if we, for economic or legal reasons related to a borrower’s financial difficulties, grant a concession to the borrower under more favorable terms and conditions than we would grant to an ordinary bank customer under the normal course of business.

We engage in other general loan restructures and modifications not considered as MLTB loans, which may include lowering interest rates, extending the maturity date, deferring or re-amortizing monthly payments or other concessions, provided that such concessions are not below market rates or considered material and outside of the terms and conditions granted to other borrowers in the ordinary course of business. These general loan restructures and modifications are made on a case-by-case basis.

24

Table of Contents

Adversely classified loans that are subsequently modified and placed in nonaccrual status are generally not returned to accrual status until a period of at least six months with consecutive satisfactory payment performance has occurred, and a return to accrual status is further supported by current financial information and analysis which demonstrates a particular borrower has the financial capacity to meet future debt service requirements.

At December 31, 2025, we had three loans with an aggregate amortized cost of $8.0 million that were identified as MLTB loans restructured during the year ended December 31, 2025. Only one of the three modified loans was performing in accordance with its revised terms and was accruing interest at year end. No reserve was included in the allowance for credit losses on loans at December 31, 2025, for the two nonperforming, individually evaluated MLTB loans as the estimated value of the collateral fully covered the recorded loan balances. Nonaccrual MLTB loans are classified as substandard while accruing MLTB loans may be classified at any level in our loan grading system depending upon verified repayment sources, collateral values and repayment history.

Classified Assets. Federal regulations provide for the classification of lower quality loans and other assets as substandard, doubtful or loss. An asset is considered substandard when material conditions are identified which raise issues about the financial capacity, collateral or other conditions which may compromise the borrower’s ability to satisfactorily perform under the terms of the loan. Substandard assets include those characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. Assets classified as doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the weaknesses present make near term collection or liquidation highly questionable and improbable. Assets classified as loss are those considered uncollectible or of no material value. Assets that do not currently expose us to sufficient risk to warrant classification as substandard or doubtful but possess identified weaknesses are classified by us as either watch or special mention assets. Our credit administration department, management, and the Board review the analysis and approve the specific loan loss allowance for these loans.

The allowance for credit losses on loans represents an estimate which has been established to recognize the inherent risk associated with lending activities. When an institution identifies a problem asset as an unavoidable and imminent loss, it is required to partially or fully charge-off such assets in the period in which they are deemed uncollectible. Our determination as to the classification of our assets and the amount of our valuation allowances is subject to review by the DFI and the FDIC, who can order specific charge-offs or the establishment of additional loan loss allowances.

We review, at least quarterly, the problem assets in our portfolio to determine whether any assets require reclassification. Based on our review, as of December 31, 2025 and 2024, we had classified loans of $35.3 million and $42.5 million, respectively. We had no other classified assets at these dates. Over 77% of the classified loan balance at December 31, 2025, was comprised of the following relationships: a $12.5 million commercial real estate loan relationship, which became classified in the fourth quarter of 2025; a $6.3 million commercial real estate loan relationship, which became classified in the third quarter of 2024; a $5.1 million construction loan relationship, which became a classified loan in the fourth quarter of 2022; and a $3.4 million commercial real estate loan relationship, which became classified in the second quarter of 2025. The Bank has exercised legal remedies, including the appointment of a third-party receiver and foreclosure actions, to liquidate the underlying collateral to satisfy the real estate loans in the third largest of these four collateral-dependent relationships. In addition to the classified loans, we had $21.6 million and $11.1 million of special mention loans at December 31, 2025 and 2024, respectively.

Classified loans, consisting solely of substandard loans, were as follows at the dates indicated:

(dollars in thousands)

December 31, 2025

December 31, 2024

Real estate loans:

One-to-four family

$
2,306

$
1,515

Commercial real estate

22,275

11,999

Construction and land

5,146

19,544

Total real estate loans

29,727

33,058

Consumer loans:

Home equity

103

99

Auto and other consumer

1,086

700

Total consumer loans

1,189

799

Commercial business loans

4,389

8,686

Total classified loans

$
35,305

$
42,543

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Table of Contents

The following table shows at December 31, 2025, the geographic distribution of our classified loans in dollar amounts and percentages.

North Olympic Peninsula (1)

Puget Sound Region (2)

Other Washington

Total in Washington State

All Other States

Total

(dollars in thousands)

Amount

% of Total in Category

Amount

% of Total in Category

Amount

% of Total in Category

Amount

% of Total in Category

Amount

% of Total in Category

Amount

% of Total in Category

Real estate loans:

One-to-four family

$
649

0.5
%

$
287

0.1
%

$
—

—
%

$
936

0.3
%

$
1,370

11.4
%

$
2,306

0.6
%

Commercial real estate

5

—

22,270

7.8

—

—

22,275

5.6

—

—

22,275

5.5

Construction and land

7

0.1

5,139

11.1

—

—

5,146

8.8

—

—

5,146

8.4

Total real estate loans

661

0.3

27,696

3.4

—

—

28,357

2.6

1,370

6.2

29,727

2.6

Consumer loans:

Home equity

103

0.2

—

—

—

—

103

0.1

—

—

103

0.1

Auto and other consumer

25

0.8

—

—

—

—

25

0.2

1,061

0.4

1,086

0.4

Total consumer loans

128

0.3

—

—

—

—

128

0.1

1,061

0.4

1,189

0.3

Commercial business loans

250

1.0

943

2.2

2,686

44.7

3,879

5.4

510

0.9

4,389

3.4

Total classified loans

$
1,039

0.4
%

$
28,639

3.2
%

$
2,686

2.7
%

$
32,364

2.5
%

$
2,941

0.8
%

$
35,305

2.2
%

(1) Includes Clallam and Jefferson counties.

(2) Includes Kitsap, Mason, Thurston, Pierce, King, Snohomish, Skagit, Whatcom, and Island counties.

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Table of Contents

Allowance for Credit Losses on Loans. The allowance for credit losses on loans was $17.0 million, or 1.04% of total loans, at December 31, 2025, compared to $20.5 million, or 1.21%, at December 31, 2024. On January 1, 2023, the Company adopted ASU 2016-13 and recorded an increase to the allowance for credit losses on loans ("ACLL") of $2.2 million, an increase to the allowance for credit losses on unfunded commitments ("ACLUC") of $1.5 million, and a $3.0 million after-tax decrease to beginning retained earnings. The ACLL is a valuation account that is deducted from the amortized cost of loans receivable to present the net amount expected to be collected. Loans are charged against the allowance when management believes the collectability of a loan balance is unlikely. Subsequent recoveries, if any, are credited to the allowance. The Bank records the changes in the ACLL through earnings, as a provision for credit losses on the Consolidated Statements of Operations. Accrued interest receivable on loans receivable is excluded from the estimate of credit losses. Instead, interest accrued, but not received, is reversed timely in accordance with our loan policy. Our accounting policies are discussed in detail in Notes 1 and 4 of the Notes to Consolidated Financial Statements included in Item 8, "Financial Statements and Supplementary Data" of this Form 10-K.

The following table summarizes the distribution of our allowance for credit losses on loans at the dates indicated.

December 31, 2025

December 31, 2024

(dollars in thousands)

Amount

Percent of loans in each category to total loans

Amount

Percent of loans in each category to total loans

Balance at End of Period Applicable to:

One-to-four family

$
3,789

23.1
%

$
4,757

23.3
%

Multi-family

2,458

17.7

2,493

19.6

Commercial real estate

3,405

24.8

2,410

23.0

Construction and land

661

3.8

576

4.6

Home equity

1,329

5.2

1,322

4.7

Auto and other consumer

1,956

17.4

2,687

15.9

Commercial business

3,389

8.0

6,204

8.9

Total allowance

$
16,987

100.0
%

$
20,449

100.0
%

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Table of Contents

The following table sets forth an analysis of our allowance for credit losses on loans:

Year Ended December 31,

(dollars in thousands)

2025

2024

Allowance at beginning of period

$
20,449

$
17,510

Charge-offs:

Commercial real estate

(6,571
)

—

Construction and land

(1,884
)

(4,389
)

Auto and other consumer

(745
)

(2,494
)

Commercial business

(6,305
)

(7,296
)

Total charge-offs

(15,505
)

(14,179
)

Recoveries:

One-to-four family

—

44

Commercial real estate

32

2

Construction and land

5

—

Auto and other consumer

198

320

Commercial business

4,488

36

Total recoveries

4,723

402

Net (charge-offs) recoveries

(10,782
)

(13,777
)

Provision for credit losses on loans

7,320

16,716

Balance at end of period

$
16,987

$
20,449

Summary of key ratios regarding allowance activity and coverage

Net (charge-offs) recoveries as a percentage of average loans:

Total loans

(0.7
)%

(0.8
)%

One-to-four family

—

—

Commercial real estate

(1.7
)

—

Construction and land

(2.8
)

(4.1
)

Auto and other consumer

(0.2
)

(1.6
)

Commercial business

(1.5
)

(2.6
)

Net (charge-offs) recoveries as a percentage of average nonperforming assets

(39.6
)

(56.1
)

Allowance as a percentage of nonperforming loans

75.2

67.0

Allowance as a percentage of total loans

1.04

1.21

Average loans receivable, net of ACLL

$
1,629,888

$
1,686,972

Average total loans receivable

$
1,648,305

$
1,705,878

28

Table of Contents

Investment Activities

General. Under Washington law, commercial banks are permitted, subject to certain limitations, to invest in various types of liquid assets, including U.S. Treasury obligations, securities of various federal agencies, certain certificates of deposit of insured banks and savings institutions, banker’s acceptances, repurchase agreements, federal funds, commercial paper, investment grade corporate debt, investment grade commercial and residential mortgage-related securities, and obligations of states and their political subdivisions.

Our Chief Financial Officer has the responsibility for the management of our investment portfolio. Various factors are considered when making investment decisions, including the marketability, maturity, duration, and tax consequences of the proposed investment. The maturity structure of investments will be affected by various market conditions, including the current and anticipated slope of the yield curve, the level of interest rates, the trend of deposit inflows, and the anticipated demand for funds from deposit withdrawals and loan originations and purchases.

The general objective of our investment portfolio is to provide liquidity, generate earnings, and manage risk. These risks include credit, reinvestment, liquidity and interest rate risks.

Securities. Total investment securities decreased $70.0 million, or 20.6%, to $270.3 million at December 31, 2025, from $340.3 million at December 31, 2024, as a result of maturities and early redemptions totaling $65.8 million and $20.1 million of principal payments received. These reductions were partially offset by an increase in the portfolio market value of $10.4 million, which was mainly driven by changes in long-term interest rates.

The issuers of mortgage-backed agency securities ("MBS") held in our portfolio, which include Fannie Mae, Freddie Mac, and Government National Mortgage Association ("Ginnie Mae"), and certain issuers of agency bonds held in our portfolio, which include FHLB and Fannie Mae, guarantee the timely principal and interest payments in the event of default. Municipal bonds consist of a mix of taxable and non-taxable revenue and general obligation bonds issued by various local and state government entities that use their revenue-generating and taxing authority as a source of repayment of their debt. Our municipal bonds are considered investment grade, and we monitor their credit quality on an ongoing basis.

Non-agency MBS securities have no guarantees in the event of default and therefore warrant continued monitoring for credit quality. Our non-agency MBS securities consist of fixed and variable rate mortgages issued by various corporations, which we believe have sufficient credit enhancements to mitigate the risk of loss on these investments, and certain corporate debt securities. Monitoring of these securities may include, but is not limited to, reviewing credit quality standards such as delinquency, subordination, and credit ratings. Our rated non-agency and corporate debt securities are considered investment grade and non-rated securities are subject to regular internal review to ensure they meet the Company's investment criteria.

As a member of the FHLB, we had an average balance of $12.7 million in stock of the FHLB for the twelve months ended December 31, 2025. We received $1.2 million and $1.2 million in dividends from the FHLB during the years ended December 31, 2025 and 2024, respectively.

29

Table of Contents

The table below sets forth information regarding the composition of our securities portfolio and other investments at the dates indicated. At December 31, 2025, our securities portfolio contained securities issued by the United States Government and its agencies which had an aggregate book value in excess of 10% of our equity capital.

December 31, 2025

December 31, 2024

(dollars in thousands)

Amortized Cost

Fair Value

Amortized Cost

Fair Value

Securities available for sale:

Municipal bonds

$
92,148

$
80,252

$
93,212

$
77,876

U.S. government agency issued asset-backed securities (ABS agency)

11,927

11,943

12,944

12,876

Corporate issued asset-backed securities (ABS corporate)

7,963

7,961

16,065

16,122

Corporate issued debt securities (Corporate debt)

39,772

38,801

58,106

54,491

U.S. Small Business Administration securities (SBA)

6,293

6,293

8,664

8,666

Mortgage-backed:

U.S. government agency issued mortgage-backed securities (MBS agency)

101,618

91,656

111,372

98,697

Non-agency issued mortgage-backed securities (MBS non-agency)

36,128

33,404

75,902

71,616

Total available for sale

295,849

270,310

376,265

340,344

FHLB stock

13,105

13,105

14,435

14,435

Total securities

$
308,954

$
283,415

$
390,700

$
354,779

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Table of Contents

Maturity of Securities. The composition and contractual maturities of our investment portfolio at December 31, 2025, excluding FHLB stock, are indicated in the following table. The yields on municipal bonds have not been computed on a tax equivalent basis.

December 31, 2025

1 year or less

Over 1 year to 5 years

Over 5 to 10 years

Over 10 years

Total Securities

(dollars in thousands)

Amortized Cost

Weighted Average Yield

Amortized Cost

Weighted Average Yield

Amortized Cost

Weighted Average Yield

Amortized Cost

Weighted Average Yield

Amortized Cost

Weighted Average Yield

Fair Value

Securities available for sale:

Municipal bonds

$
—

—
%

$
3,048

2.21
%

$
26,314

2.55
%

$
62,786

2.41
%

$
92,148

2.44
%

$
80,252

ABS agency

—

—

—

—

—

—

11,927

5.27

11,927

5.27

11,943

ABS corporate

—

—

—

—

—

—

7,963

6.13

7,963

6.13

7,961

Corporate debt

1,000

6.00

21,034

6.13

16,738

5.33

1,000

4.13

39,772

5.74

38,801

SBA

—

—

—

—

2,304

5.44

3,989

4.83

6,293

5.05

6,293

Mortgage-backed:

MBS agency

—

—

3,147

3.81

7,215

3.46

91,256

4.01

101,618

3.97

91,656

MBS non-agency

4,602

7.30

3,765

6.27

—

—

27,761

2.97

36,128

3.86

33,404

Total securities available for sale

$
5,602

7.06
%

$
30,994

5.53
%

$
52,571

3.69
%

$
206,682

3.56
%

$
295,849

3.85
%

$
270,310

31

Table of Contents

At December 31, 2025, of the 167 investment securities held, there were 135 investment securities with $26.2 million of unrealized losses and a fair value of approximately $209.3 million. At December 31, 2024, of the 191 investment securities held, there were 166 investment securities with $36.2 million of unrealized losses and a fair value of approximately $283.9 million. Management believes that the unrealized losses on our investment securities relate principally to the general changes in interest rates, market liquidity and demand, and market volatility that have occurred since the initial purchase, and that such unrecognized losses or gains will continue to vary with general interest rate level and market fluctuations in the future. We do not believe the unrealized losses on our securities are related to a deterioration in credit quality. Certain investments in a loss position are guaranteed by government entities or government sponsored entities. The Company does not intend to sell the securities in an unrealized loss position and believes it is not likely it will be required to sell these investments prior to a market price recovery or maturity. Based on the Company’s evaluation of these securities, no credit impairment was recorded at December 31, 2025 and 2024.

Subsequent to year end, the Company became aware that its $2.0 million investment in subordinated debt may be approaching payment default. The issuer has requested a loan modification in advance of the interest payment due on March 15, 2026. If a modification agreement is not reached, there is a strong likelihood that the issuer will not be able to meet the scheduled interest payment due no later than March 25, 2026, including the 10-day grace period, which would place the subordinated debt in default. Management is actively monitoring the situation. Management is also assessing the likelihood and timing of recovery, including possible legal actions. No adjustments have been made to the December 31, 2025, investment securities data provided above as this event occurred after the balance sheet date.

Deposit Activities and Other Sources of Funds

General. Customer deposits, brokered deposits, borrowings and loan and investment cash flows are the major sources of our funds for lending, investment, and general business purposes. Scheduled loan and investment repayments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments are influenced significantly by general interest rates and other market conditions. Borrowings from the FHLB and subordinated debt are used to supplement the availability of funds from other sources and as a source of term funds to assist in the management of interest rate risk.

Our deposit composition consists of interest and noninterest-bearing checking, savings, money market accounts, and certificates of deposit. We rely on marketing activities, digital channels, branch facilities, mail and contact center services, relationship management, word of mouth referrals, and a broad range of deposit products and payment services to attract and retain customer deposits.

Deposits. Deposits are attracted from within our market area through the offering of a broad selection of deposit instruments, including checking accounts, money market deposit accounts, savings accounts and certificates of deposit with a variety of rates. Deposit account terms vary according to the minimum balance required, the time periods the funds must remain on deposit, and the interest rate, among other factors. In determining the terms of our deposit accounts, we consider the development of long-term profitable customer relationships, current market interest rates, current maturity structure and deposit mix, our customer preferences, and the profitability of acquiring customer deposits compared to alternative sources.

We also utilize wholesale deposits, including brokered deposits and listing service deposits, to augment customer deposit balances. At December 31, 2025, all of our brokered deposits were certificates. Balances at each of the periods presented reflect direct offerings issued by the Bank through contracts with third-party brokers. The Bank utilizes services provided to the Depository Trust and Clearing Corporation to disburse interest and principal payments on direct offerings. We also maintain a relationship with IntraFi that allows the Bank to participate in their certificate of deposit account registry service ("CDARS"), which pools large deposits placed with CDARS by financial institution customers and distributes the balances across the network of participants. The Bank also participates in IntraFi's Insured Cash Sweep ("ICS") program which pools and distributes transaction and savings account balances.

32

Table of Contents

Deposit Activity. The following table sets forth activity in our total deposit balance for the periods indicated.

Year Ended December 31,

(dollars in thousands)

2025

2024

Beginning balance

$
1,688,026

$
1,676,892

Net deposits

(125,945
)

(31,293
)

Interest credited

37,020

42,427

Ending balance

$
1,599,101

$
1,688,026

Net (decrease) increase

$
(88,925
)

$
11,134

Percent (decrease) increase

(5.3
)%

0.7
%

Types of Deposits. The following table sets forth the dollar amount of deposits in the various types of deposits programs we offered at the dates indicated.

December 31, 2025

December 31, 2024

(dollars in thousands)

Amount

Percent of Total

Amount

Percent of Total

Transactions and Savings Deposits:

Noninterest-bearing transaction

$
245,760

15.4
%

$
256,416

15.2
%

Interest-bearing transaction

143,166

9.0

164,891

9.8

Money market accounts

451,143

28.2

413,822

24.5

Savings accounts

239,258

15.0

205,055

12.1

Total transaction and savings deposits

1,079,327

67.6

1,040,184

61.6

Certificates: (1)

0.00 – 0.99%

3,522

0.2

13,720

0.8

1.00 – 1.99%

7,139

0.4

9,607

0.6

2.00 – 2.99%

61,694

3.9

6,950

0.4

3.00 – 3.99%

326,946

20.4

108,921

6.5

4.00 – 4.99%

120,473

7.5

403,891

23.9

5.00 – 5.99%

—

—

104,753

6.2

Total certificates

519,774

32.4

647,842

38.4

Total deposits

$
1,599,101

100.0
%

$
1,688,026

100.0
%

(1) Brokered certificates of deposit included in certificates

$
86,510

$
182,914

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Table of Contents

Deposit Maturities. The following table sets forth the rate and maturity information of our time deposit certificates at December 31, 2025.

Rate

(dollars in thousands)

0.00 -

0.99%

1.00 -

1.99%

2.00 -

2.99%

3.00 -

3.99%

4.00 -

4.99%

Total

Percent of Total

Certificate accounts maturing in quarter ending:

March 31, 2026

$
1,172

$
78

$
20,703

$
53,764

$
47,801

$
123,518

23.8
%

June 30, 2026

344

336

13,211

33,882

50,911

98,684

19.0

September 30, 2026

665

288

12,721

85,419

8,807

107,900

20.8

December 31, 2026

108

2,484

7,614

107,949

2,562

120,717

23.2

March 31, 2027

588

81

3,906

26,375

2,492

33,442

6.4

June 30, 2027

40

541

894

519

2,297

4,291

0.8

September 30, 2027

—

245

421

14,802

—

15,468

3.0

December 31, 2027

—

144

253

387

5,603

6,387

1.2

March 31, 2028

605

627

605

197

—

2,034

0.4

June 30, 2028

—

509

53

825

—

1,387

0.3

September 30, 2028

—

795

55

85

—

935

0.2

December 31, 2028

—

312

85

730

—

1,127

0.2

Thereafter

—

699

1,173

2,012

—

3,884

0.7

Total certificates

$
3,522

$
7,139

$
61,694

$
326,946

$
120,473

$
519,774

100.0
%

Percent of total

0.7
%

1.4
%

11.9
%

62.8
%

23.2
%

100.0
%

Deposit Balances in Excess of the FDIC Insured Limit. The FDIC insures up to $250,000 per depositor for each account ownership category for which the depositor qualifies. Depositors may qualify for coverage over the limit if they have funds in multiple ownership categories and all FDIC requirements are met. The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank’s regulatory reporting requirements. The Company has an estimated $371.3 million and $390.5 million, or 23.2% and 23.1%, of total deposit balances were uninsured at December 31, 2025 and 2024, respectively.

The following table sets forth the portion of our certificate accounts that were in excess of the FDIC insurance limit by time remaining until maturity as of December 31, 2025.

(dollars in thousands)

3 months or less

$
28,255

Over 3 through 6 months

13,594

Over 6 through 12 months

38,931

Over 12 months

14,641

Total

$
95,421

The Federal Reserve may require First Fed to maintain reserves on transaction accounts or non-personal time deposits. These reserves may be in the form of cash or noninterest-bearing deposits with the Federal Reserve Bank of San Francisco. Negotiable order of withdrawal accounts and other types of accounts that permit payments or transfers to third parties fall within the definition of transaction accounts and are subject to the reserve requirements, as are any non-personal time deposits at a commercial bank. As of December 31, 2025, our deposit with the Federal Reserve Bank of San Francisco and vault cash exceeded our reserve requirements.

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Borrowings. We use advances from the FHLB, including short-term overnight, short-term advances with initial maturities of less than one year, and longer-term advances maturing in one year or more, to meet ongoing liquidity needs and to mitigate interest rate risk. As a member of the FHLB, we are authorized to apply for advances based on the value of certain pledged real estate loans. Advances are made under various terms pursuant to several different credit programs, each with its own interest rate and range of maturities. Depending on the program, limitations on the amount of advances are based on the financial condition of the member institution and the adequacy of collateral pledged to secure the credit. We maintain a committed credit facility with the FHLB, and at December 31, 2025, had pledged loan collateral to support a borrowing capacity of $525.1 million. In addition, the Bank had outstanding letters of credit from the FHLB to secure public deposits and the Bellevue, Washington branch lease liability. At December 31, 2025, outstanding advances from the FHLB totaled $260.0 million and the combined balance for the two letters of credit was $60.8 million, leaving a remaining borrowing capacity of $204.4 million.

First Fed maintains an established borrowing arrangement to use the Federal Reserve Board of San Francisco's ("FRB") discount window. At December 31, 2025, we had pledged securities with a carrying value of $18.0 million as collateral to support a borrowing capacity of $17.3 million. A borrowing test was performed in June 2025.

On March 25, 2021, the Company completed a private placement of $40.0 million of 3.75% fixed-to-floating rate subordinated notes due 2031 (the "Notes") to certain qualified institutional buyers and institutional accredited investors. The net proceeds to the Company from the sale of the Notes were approximately $39.3 million after deducting placement agent fees and other offering expenses. The Notes have been structured to qualify as Tier 2 capital for the Company for regulatory capital purposes. The Company used the net proceeds of the offering for general corporate purposes. Beginning in April 2026, the interest rate will reset quarterly to the three-month SOFR plus 300-basis points. In March 2025, the Company redeemed $5.0 million of the Notes at a discount, resulting in a reduction to the outstanding balance and a $905,000 gain on extinguishment of debt recorded in noninterest income.

On May 20, 2022, First Northwest began a borrowing arrangement with NexBank for a revolving line of credit. The agreement was modified in 2025 and the new terms allow a maximum extension of credit of $15.0 million. Borrowings under the arrangement with NexBank are secured by a blanket lien on First Northwest's personal property assets (with certain exclusions), including all the outstanding shares of First Fed, cash, loans receivable, and limited partnership investments. The line of credit matures on November 16, 2026. At December 31, 2025, the outstanding advance totaled $13.5 million, leaving a remaining borrowing capacity of $1.5 million.

In October 2023, Pacific Coast Bankers Bank ("PCBB") extended a $50.0 million unsecured Fed Funds Borrowing Facility to the Bank. The Bank must maintain a minimum demand deposit account average balance of $250,000 with PCBB. Availability of funds are not guaranteed and facility usage is generally limited to ten consecutive days. Available borrowing capacity was $50.0 million at December 31, 2025. A borrowing test was performed in June 2025. This credit facility is authorized for use through December 2027.

The following tables set forth information regarding our borrowings at the end of and during the periods indicated. The tables include both long- and short-term borrowings.

Year Ended December 31,

(dollars in thousands)

2025

2024

Maximum balance:

FHLB long-term advances

$
170,000

$
170,000

FHLB overnight borrowings

130,000

270,000

Line of credit

15,000

10,000

Subordinated debt, net

39,527

39,514

Average balances:

FHLB long-term advances

$
167,083

$
136,250

FHLB overnight borrowings

87,500

137,750

Line of credit

11,192

6,635

Subordinated debt, net

35,542

39,475

Weighted average interest rate:

FHLB long-term advances

3.86
%

3.35
%

FHLB overnight borrowings

4.18

5.38

Line of credit

8.07

9.41

Subordinated debt, net

3.99

4.00

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Year Ended December 31,

(dollars in thousands)

2025

2024

Balance outstanding at end of period:

FHLB long-term advances

$
160,000

$
160,000

FHLB overnight borrowings

100,000

130,000

Line of credit

13,500

6,500

Subordinated debt, net

34,643

39,514

Total borrowings

$
308,143

$
336,014

Weighted average interest rate at end of period:

FHLB long-term advances

4.03
%

3.63
%

FHLB overnight borrowings

4.00

4.64

Line of credit

7.25

8.00

Subordinated debt, net

4.10

3.99

Total borrowings

4.17

4.15

Subsidiary and Other Activities

In December 2019, the Company invested in Canapi Ventures as a limited partner to strategically invest in fintech-related businesses. The Company is dedicated to the discovery of, and investment in, those fintech-related companies that we expect may also contribute to the evolution of digital solutions applicable to the banking industry. This commitment to Canapi Ventures will be for up to ten years, with cash commitments totaling up to $3.0 million to be paid into the partnership through March 2026. As of December 31, 2025, $2.5 million had been contributed to this partnership. The recorded investment was $2.6 million at December 31, 2025.

In February 2021, First Fed invested in Makers Square Master Tenant, LLC as a limited partner in order to participate in an historic tax credit transaction. This entity meets the criteria for reporting under the equity method of accounting. The tax credit generated by the $2.2 million initial investment was utilized on the Company's 2021 federal income tax return. The Bank plans to exercise the put option when it becomes available in 2026.

In September 2021, the Company invested in BankTech Ventures, LP ("BankTech") as a limited partner to strategically invest in fintech-related businesses. The commitment to BankTech will be for up to ten years, with cash installments totaling up to $1.0 million to be paid into the partnership through October 2026. As of December 31, 2025, $740,000 had been contributed to this partnership. The recorded investment was $708,000 at December 31, 2025.

In December 2021, the Company invested in JAM FINTOP Frontier Fund, LP as a limited partner to strategically invest in fintech-related businesses. This commitment will be for up to ten years, with cash installments totaling up to $1.0 million to be paid into the partnership through April 2027. As of December 31, 2025, $555,000 had been contributed to this partnership. The recorded investment was $515,000 at December 31, 2025.

In February 2022, the Bank invested in a Small Business Investment Company through Canapi Ventures (SBIC Fund II). This commitment will be for up to ten years with two possible one-year extensions, with cash installments totaling up to $2.0 million to be paid into the company over the commitment period, beginning in 2022. As of December 31, 2025, $925,000 has been contributed to this fund. The recorded investment was $777,000 at December 31, 2025.

In April 2022, First Northwest invested $3.0 million in Meriwether Group Capital Hero Fund LP, a private commercial lender focused on lower-middle market businesses, primarily in the Pacific Northwest. A second $3.0 million investment was made in May 2022, bringing the Company's total investment in the Hero Fund to $6.0 million. In June 2024, First Northwest redeemed its investment in the Hero Fund and First Fed made a subsequent $6.0 million limited partnership investment in the same entity. The recorded investment was $6.0 million at December 31, 2025. Subsequent to year end, the Bank signed a redemption agreement which sets forth the path to unwind its investment in the Hero Fund through capital distributions beginning in April 2026.

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Also in April 2022, First Northwest made an initial investment for a 5% interest in Meriwether Group Capital, LLC, which provides financial advice for borrowers and capital for the Hero Fund. In October 2022, the Company completed an additional purchase and holds a 25% equity interest in MWGC valued at $150,000 at December 31, 2025. The recorded investment in MWGC was $150,000 at December 31, 2025. Subsequent to year end, the Company redeemed its interest in MWGC at par.

In June 2022, First Northwest made an initial investment for a 5% interest in The Meriwether Group, LLC, a boutique investment bank focusing on providing entrepreneurs with resources to help them succeed, including equity and debt raising services along with strategic positioning of business throughout the U.S. In September 2022, the Company completed an additional purchase and holds a 33% interest in MWG valued at $2.8 million at December 31, 2025. First Northwest issued 115,777 shares of stock with a value of $1.9 million to the existing partners in MWG as consideration in the acquisition transaction. MWG also holds a 20% interest in MWGC. The recorded investment in MWG was $3.0 million at December 31, 2025.

Competition

We face competition in originating loans from other banks, credit unions, life insurance companies, mortgage bankers, public and private capital markets, and digital lenders. In general, the primary factors in competing for loans are interest rates and rate adjustment provisions, loan maturities, loan fees, and the quality of service. We offer competitive terms and conditions and compete by delivering high-quality, personal service to our customers. Competition for loans is also strong due to the number and variety of institutions competing in our market areas. For instance, competition for loans is particularly intense in the larger markets in the Puget Sound area, such as Seattle, Washington.

Competition for deposits is primarily from other banks, credit unions, mutual funds, and other alternative investment vehicles such as securities firms, insurance companies, etc., which may be offered locally or via the internet. We expect continued competition from such financial institutions and investment vehicles in the foreseeable future, including competition from digital banking competitors, challenger banks, and "Fintech" companies that rely on technology to provide financial services. We compete for these deposits by offering excellent service and a variety of deposit accounts at competitive rates and through our branch network. We also compete for deposits by offering a variety of financial services, including online and mobile banking capabilities. Based on the most recent branch data provided by the FDIC, as of June 30, 2025, First Fed’s share of bank, savings bank and savings and loan association deposits in Clallam and Jefferson counties was 41.2% and 22.5%, respectively, and was less than 4% in Whatcom, Kitsap and King counties.

Human Capital Resources

At December 31, 2025, we had 242 full-time equivalent team members. At that date, the average tenure of all our full-time team members was approximately 5.6 years while the average tenure of our executive officers was approximately 2.9 years. Our team members are not represented by any collective bargaining group.

Our Board guides the implementation of our corporate mission, vision, and values as an important element of risk oversight. Our Board holds senior management accountable for embodying, maintaining, and communicating our culture to team members. In that regard, our corporate mission, vision, and values are designed to promote commitment to making the lives of all those around us better and to uphold that principle in everything we do. That commitment has been a pillar in our approach to our team members and the communities we have proudly served for over 100 years. Our culture is designed to adhere to the timeless values of optimism, respect, initiative, growth, and ownership. In keeping with that culture, we strive to be a force for good in everyday life and expect our team members to treat each other and our customers with the highest level of care and respect, going out of their way to do the right thing.

We dedicate resources to promote a safe and inclusive workplace; attract, develop, and retain a diverse group of talented team members; promote a culture of integrity, caring, and excellence; and reward and recognize team members for both the results they deliver and, just as importantly, how they deliver them. We also seek to design fulfilling careers, with competitive compensation and benefits combined with a positive work-life balance. We dedicate resources to fostering professional and personal growth with continuing education, on-the-job training, and development programs.

Our team members are the cornerstone of our success as an organization. We are committed to attracting, retaining, and promoting highly qualified individuals from a wide array of backgrounds. We believe employing a talented and inclusive workforce enhances our ability to serve our customers and our communities. In 2025, we formed the First Fed Next Committee to act as a governing body for our cultural initiatives and to promote team member engagement.

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We seek to better understand the financial needs of our prospective and current customers by promoting and fostering a workforce that reflects the communities we serve, along with providing relevant financial service products. As we move forward, we will continue to grow in a manner consistent with our company vision: to create well-being and prosperity for our team members, customers and communities.

Information About Our Executive Officers

The following is a description of the principal occupation and employment of the executive officers of the Company and the Bank as of December 31, 2025. As previously disclosed in a Current Report on Form 8‑K filed on January 8, 2026, Geri Bullard resigned from her position as Chief Operating Officer, effective February 4, 2026. Accordingly, she is not included in the executive officer information presented below.

Curt Queyrouze, age 64, is President and Chief Executive Officer ("CEO") of the Company and First Fed, a position he has held since September 2025. Mr. Queyrouze is a seasoned community bank leader with more than 40 years of financial services experience, including expertise in strategic planning, credit, risk management, and financial technology. Before joining First Northwest, Mr. Queyrouze served as President, Community Bank and Corporate Credit at Coastal Community Bank in Everett, Washington. from May 2022 to September 2025 Previously, he was President and Chief Executive Officer at TAB Bank in Ogden, Utah from January 2014 to May 2022. His career includes leadership roles at a variety of institutions including PNC, Hancock Whitney, National Bank of Canada, and community banks. He also served as Chief Operating Officer of a fintech company. Mr. Queyrouze currently serves on the board of the Cocoon House, supporting youth homelessness intervention, and the University of Washington's Global Banking Program at the Foster School of Business. He has also served on the board of directors of the Utah Bankers Association, The Youth Impact Center and the Utah AIDS Foundation and is active in many banking and fintech industry organizations. Mr. Queyrouze holds a degree in Accounting from Louisiana State University.

David B. Edelstein, age 56, is Executive Vice President and Chief Innovation Officer ("CIO"), a position he has held since March 2024. Prior to becoming CIO, from November 2018 to March 2024, Mr. Edelstein was the CEO of Level Technology, a financial technology company which provided financial services designed to empower very small businesses to thrive. This built on his career at the intersection of financial services and technology, as the Director of the Grameen Technology Center, a product leader at Microsoft and an engagement manager at McKinsey & Company. Mr. Edelstein holds a master’s degree in Economics and Public Policy from Princeton University and a bachelor’s degree from Colby College.

Kyle D. Henderson, age 41, is Executive Vice President and Chief Credit Officer ("CCO") of First Fed, a position he has held since July 2024. He joined First Fed in August 2023 as the Deputy Chief Credit Officer. Prior to joining First Fed, Mr. Henderson served as Executive Vice President for FirstBank where he held positions in credit administration, commercial and consumer lending, and retail banking. He served in this capacity from December 2007 to July 2023. He holds a bachelor's degree from the University of Oregon and is a graduate of the American Bankers Association’s Stonier School of Banking at the University of Pennsylvania. Mr. Henderson currently serves on the board of directors for Peninsula Behavioral Health and the Clallam County Economic Development Council, and is active with the Washington Bankers Association. He has previously served various roles with governmental, private and non-profit agencies that focus on economic development, workforce development, education, conservation and at-risk youth services.

Allison R. Mahaney, age 44, is Executive Vice President and Chief Legal Officer ("CLO") of First Fed and First Northwest, a position she has held since October 2025. She has also served as the Company’s Corporate Secretary since June 2020. Prior to becoming CLO, Ms. Mahaney served as General Counsel from January 2022 to October 2025 and as Assistant General Counsel from January 2020 to June 2022. Before joining First Fed, Ms. Mahaney operated a private law practice where she provided legal counsel to municipalities, nonprofits, businesses, and individuals across a range of matters. She holds a Juris Doctor degree from the Northwestern School of Law of Lewis & Clark College and a Master of Business Administration from the University of Washington.

Phyllis R. Nomura, age 56, is Executive Vice President and Chief Financial Officer ("CFO") of the Company and First Fed, a position she has held since March 2025. She joined First Fed in November 2024 as the Senior Director of Accounting and Finance. Prior to joining First Fed, she served as CFO of the YWCA Seattle King Snohomish, located in Seattle, from May 2023 to November 2024, and CFO of Kosmos Management, in Seattle, from August 2016 to November 2022. Ms. Nomura held other CFO positions prior to Kosmos Management at four financial institutions from May 2005 to January 2016. She began her career in public accounting and served as an Auditor and Senior Audit Manager at Deloitte from January 1994 to September 2001. Ms. Nomura currently is a board member and Treasurer of Learning Communities Foundation, which helps ensure educational success for children in the Puget Sound Region. Ms. Nomura holds a Bachelor of Business Administration degree from Grand Valley State University and is a licensed CPA.

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Available Information

The Company provides an Investor Relations link on its website (www.ourfirstfed.com) to the Securities and Exchange Commission’s ("SEC") website (www.sec.gov) for purposes of providing copies of its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and proxy statements and amendments thereto. Other than an investor’s own internet access charges, these filings are available free of charge. The information contained on the Company's website as referenced in this Form 10-K should not be considered as part of this report.

Regulation and Supervision

First Northwest and First Fed are subject to federal, state, and local laws that may change from time to time. This section provides a general overview of the federal and state regulatory framework applicable to First Northwest and First Fed. The descriptions of laws and regulations included herein do not purport to be complete and are qualified in their entirety by reference to the actual laws and regulations.

These statutes and regulations, as well as related policies, continue to be subject to change by Congress, state legislatures, and federal and state regulators. Changes in statutes, regulations, or regulatory policies applicable to First Northwest and First Fed (including their interpretation or implementation) cannot be predicted and could have a material effect on First Northwest’s and First Fed’s business and operations. Numerous changes to the statutes, regulations, and regulatory policies applicable to First Northwest and First Fed have been made or proposed in recent years. Any such legislation or regulatory changes in the future by the FDIC, DFI, Federal Reserve or the CFPB could adversely affect our operations and financial condition.

Regulation of First Fed

General. First Fed, as a state-chartered commercial bank, is subject to applicable provisions of Washington law and to regulations and examinations of the DFI. It also is subject to examination and regulation by the FDIC, which insures the deposits of First Fed to the maximum extent permitted by law. During these state or federal regulatory examinations, the examiners may, among other things, require First Fed to provide for higher general or specific loan loss reserves, which can impact our capital and earnings. This regulation of First Fed is intended for the protection of depositors and the deposit insurance fund ("DIF") of the FDIC and not for the purpose of protecting the shareholder(s) of First Fed or First Northwest. First Fed is required to maintain minimum levels of regulatory capital and is subject to some limitations on the payment of dividends to First Northwest. See "– Capital Requirements" and "– Dividends."

Federal and State Enforcement Authority and Actions. As part of its supervisory authority over Washington-chartered commercial banks, the DFI may initiate enforcement proceedings to obtain a cease-and-desist order against an institution believed to have engaged in unsafe and unsound practices or to have violated a law, regulation, or other regulatory limit, including a written agreement. The FDIC also has the authority to initiate enforcement actions against insured institutions for similar reasons and may terminate the deposit insurance of such an institution if, among other things, the FDIC determines that the institution has engaged in unsafe or unsound practices or is in an unsafe or unsound condition. Both agencies may utilize less formal supervisory tools to address their concerns about the condition, operations, or compliance status of a commercial bank.

Regulation by the Washington Department of Financial Institutions. State laws and regulations govern First Fed's ability to take deposits and pay interest, to make loans on or invest in residential and other real estate, to make consumer loans, to invest in securities, to offer various banking services to its customers, and to establish branch offices. As a state-chartered commercial bank, First Fed must pay semi-annual assessments, examination costs and certain other charges to the DFI. Washington law generally provides the same powers for Washington commercial banks as federally and other-state chartered banks and savings institutions with branches in Washington, subject to the approval of the DFI.

Insider Credit Transactions. Banks are subject to certain restrictions on extensions of credit to executive officers, directors, principal shareholders, and their related interests. These extensions of credit (1) must be made on substantially the same terms (including interest rates and collateral) and follow credit underwriting procedures that are at least as stringent as those prevailing at the time for comparable transactions with persons not related to the lending bank; and (2) must not involve more than the normal risk of repayment or present other unfavorable features. Banks are also subject to certain lending limits and restrictions on overdrafts to insiders. A violation of these restrictions may result in the assessment of substantial civil monetary penalties, regulatory enforcement actions, and other regulatory sanctions. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act") and federal regulations place additional restrictions on loans to insiders and generally prohibit loans to senior officers other than for certain specified purposes.

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Insurance of Accounts and Regulation by the FDIC. The DIF of the FDIC insures deposit accounts in First Fed up to $250,000 per separately insured depositor for each account ownership category for which the depositor qualifies. As insurer, the FDIC imposes deposit insurance premiums. The FDIC is also authorized to conduct examinations of, and to require reporting by, FDIC-insured institutions for which it is the primary federal regulator, and in certain other circumstances. Our deposit insurance premiums for the year ended December 31, 2025, were $1.7 million. No institution may pay a dividend to its parent holding company if it is in default on its federal deposit insurance assessment.

The FDIC determines the amount of insurance premiums based on each financial institution's deposit base and the applicable assessment rate. The assessment rate for small institutions, which are generally those with less than $10 billion in assets, is based on an institution’s weighted average CAMELS component ratings and certain financial ratios. Assessment rates currently range from 2.5 to 32 basis points for small institutions.

The FDIC has authority to increase assessment rates and most recently exercised that authority for the first quarterly assessment period of 2023. Increases to insurance assessments have an adverse effect on the operating expenses and results of operations of First Fed. The FDIC communicated that the new assessment rate schedules will remain in effect unless and until the reserve ratio meets or exceeds two percent. Progressively lower assessment rates can be expected when the reserve ratio reaches two percent. Management cannot predict what assessment rates will be in the future.

Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. The FDIC may also prohibit any insured institution from engaging in any activity determined by regulation or order to pose a serious risk to the DIF. We do not currently know of any practice, condition, or violation that may lead to termination of our deposit insurance.

Prompt Corrective Action. Federal statutes establish a supervisory framework, designed to place restrictions on an insured depository institution if its capital levels begin to show signs of weakness, based on five capital categories: "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized" and "critically undercapitalized." An institution’s category depends upon where its capital levels are in relation to relevant capital measures, which include risk-based capital measures, Tier 1 and common equity Tier 1 capital measures, a leverage ratio capital measure, and certain other factors. The federal banking agencies have adopted regulations that implement this statutory framework.

Under these regulations, an institution is treated as well capitalized if it has a ratio of total capital to risk-weighted assets of 10.0% or more (the total risk-based capital ratio); a ratio of Tier 1 capital to risk-weighted assets (the Tier 1 risk-based capital ratio) of 8.0% or more; a ratio of Tier 1 common equity capital to risk-weighted assets (the common equity Tier 1 capital ratio) of 6.5% or more; a ratio of Tier 1 capital to average consolidated assets (the leverage ratio) of 5.0% or more; and the institution is not subject to a federal order, agreement, or directive to meet a specific capital level. The classifications for "undercapitalized," "significantly undercapitalized" and "critically undercapitalized" institutions are also set forth in the regulations. An institution that is not well capitalized is subject to certain restrictions on brokered deposits and restrictions on the rates it can offer on its deposits generally. Any institution which is neither well capitalized nor adequately capitalized is considered undercapitalized. Further, an institution may be downgraded to a category lower than indicated by its capital ratios if it is determined to be in an unsafe or unsound condition, or if the institution receives an unsatisfactory examination rating.

Undercapitalized institutions are subject to certain prompt corrective action requirements, regulatory controls, and restrictions which become more extensive as an institution becomes more severely undercapitalized. At December 31, 2025, First Fed was categorized as "well capitalized." For additional information, see Note 12 of the Notes to Consolidated Financial Statements included in Item 8, "Financial Statements and Supplementary Data," of this Form 10-K.

Capital Requirements. Federal regulations require insured depository institutions and bank holding companies (including financial holding companies) to meet several minimum capital standards. The minimum capital level requirements applicable to First Northwest and First Fed are: (i) a common equity Tier 1 ("CET1") capital to risk-based assets ratio of 4.5%; (ii) a Tier 1 capital to risk-based assets ratio of 6%; (iii) a total capital to risk-based assets ratio of 8%; and (iv) a leverage ratio of Tier 1 capital to total assets of 4%.

In addition to the minimum capital ratios, the capital regulations require a banking organization to maintain a capital conservation buffer, designed to absorb losses during periods of economic stress, consisting of additional CET1 capital of more than 2.5% of risk-weighted assets above the required minimum risk-based capital ratios in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses.

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As of December 31, 2025, First Northwest and First Fed each met the minimum capital ratio requirements and exceeded the capital conservation buffer requirement. For additional information regarding First Northwest’s and First Fed’s required and actual capital levels at December 31, 2025, see Note 12 of the Notes to Consolidated Financial Statements included in Item 8, "Financial Statements and Supplementary Data," of this Form 10-K.

Federal Home Loan Bank System. First Fed is a member of the FHLB of Des Moines. All advances from the FHLB are required to be fully secured by sufficient collateral as determined by the FHLB, and all long-term advances are required to provide funds for residential home financing. At December 31, 2025, First Fed had $260.0 million of outstanding advances from the FHLB of Des Moines. See Item 1, "Business – Deposit Activities and Other Sources of Funds – Borrowings."

Activities and Investments of Insured State-Chartered Financial Institutions. Federal law generally limits the activities and equity investments of FDIC insured, state-chartered banks to those that are permissible for national banks.

Dividends. Dividends from First Fed, which are subject to regulation and limitation, constitute a major source of funds for dividends paid by First Northwest to shareholders. As a general rule, regulatory authorities may prohibit banks and financial holding companies from paying dividends in a manner that would constitute an unsafe or unsound banking practice. For example, regulators have stated that paying dividends that deplete an institution's capital base to an inadequate level would be an unsafe and unsound banking practice and that an institution should generally pay dividends only out of current operating earnings. In addition, a bank may not pay cash dividends if that payment could reduce the amount of its capital below the minimum applicable regulatory capital requirements. According to Washington law, First Fed may not declare or pay a cash dividend on its capital stock if it would cause its net worth to be reduced below (1) the amount required for liquidation accounts or (2) the net worth requirements, if any, imposed by the Director of the DFI. Additionally, dividends on First Fed’s capital stock may not be paid in an aggregate amount greater than the aggregate retained earnings of First Fed without the approval of the Director of the DFI.

Affiliate Transactions. Federal laws strictly limit the ability of banks to engage in certain transactions with their affiliates, including their financial holding companies. Transactions deemed to be a "covered transaction" under Section 23A of the Federal Reserve Act and between a bank and its parent company or the nonbank subsidiaries of the bank holding company are limited to 10% of the bank’s capital and surplus to a single affiliate and, with respect to all affiliates, to an aggregate of 20% of the bank’s capital and surplus. Further, covered transactions that are loans and extensions of credit generally are required to be secured by eligible collateral in specified amounts. Federal law also requires that most transactions between a bank and its affiliates be on terms at least as favorable to the bank as transactions with non-affiliates.

Community Reinvestment Act. First Fed is subject to the provisions of the Community Reinvestment Act of 1977 (the "CRA"). Under the CRA, federal bank regulators assess a bank’s performance under the CRA in meeting the credit needs of the communities serviced by the bank, including low-and moderate -income neighborhoods. The regulatory agency’s assessment of a bank’s record is made available to the public. Further, a bank’s CRA performance rating must be considered in connection with a bank’s application, among other things, to establish a new branch office that will accept deposits; to relocate an existing office; or to merge or consolidate with, or acquire the assets or assume the liabilities of, a federally regulated financial institution. In some cases, a bank's failure to perform satisfactorily under the CRA, or CRA-related protests filed by interested parties during applicable comment periods, can result in the denial or delay of such transactions. First Fed received a "satisfactory" rating during its most recent CRA examination.

On October 24, 2023, the federal banking agencies issued a final rule revising their framework for evaluating banks’ records of community reinvestment under the CRA. On July 16, 2025, these bank regulatory agencies issued a proposal to rescind the October 2023 final rule and reinstate the CRA framework that existed prior to the October 2023 final rule, which has remained in effect. The Bank’s most recent performance evaluation was conducted using the CRA framework that existed prior to the October 2023 final rule.

Commercial Real Estate Ratios. The federal banking regulators have issued guidance regarding concentrations in commercial real estate lending, including acquisition, development and construction lending. The purpose of the guidance is to guide banks in developing risk management practices and capital levels commensurate with the level and nature of real estate concentrations. The guidance provides that the strength of an institution’s lending and risk management practices with respect to such concentrations will be considered in evaluating capital adequacy and provides supervisory criteria that identifies institutions that are potentially exposed to significant commercial real estate concentration risk, but does not specifically limit a bank’s commercial real estate lending to a specified concentration level.

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Privacy Standards. The Gramm-Leach-Bliley Financial Services Modernization Act of 1999 ("GLBA") modernized the financial services industry by, among other things, establishing a comprehensive framework to permit affiliations among commercial banks, insurance companies, securities firms and other financial service providers. First Fed is subject to FDIC regulations implementing the privacy protection provisions of the GLBA. These regulations require First Fed to disclose its privacy policy, including informing consumers of its information sharing practices and informing consumers of their rights to opt out of certain practices.

Federal Reserve System. The Federal Reserve Board has historically required that all depository institutions maintain reserves on transaction accounts, primarily checking accounts. These reserves may be in the form of cash or noninterest-bearing deposits with the regional Federal Reserve Bank. The Federal Reserve reduced the reserve requirement ratios to zero percent effective on March 26, 2020, effectively eliminating the requirements. The Federal Reserve took that action due to a change in its approach to monetary policy; it has indicated that it has no plans to reimpose reserve requirements but could in the future if conditions warrant.

Anti-Money Laundering and Anti-Terrorism. The Bank Secrecy Act ("BSA") requires all financial institutions to establish a risk-based system of internal controls reasonably designed to prevent money laundering and the financing of terrorism. The BSA also sets forth various recordkeeping and reporting requirements (such as reporting suspicious activities that might signal criminal activity) and certain due diligence and "know your customer" documentation requirements.

The Anti-Money Laundering Act of 2020 ("AMLA"), which amends the BSA, was enacted in January 2021. The AMLA is intended to be a comprehensive reform and modernization to U.S. bank secrecy and anti-money laundering laws. Among other things, it codifies a risk-based approach to anti-money laundering compliance for financial institutions; requires the U.S. Department of the Treasury to promulgate priorities for anti-money laundering and countering the financing of terrorism policy; requires the development of standards for testing technology and internal processes for BSA compliance; expands enforcement- and investigation-related authority, including increasing available sanctions for certain BSA violations; and expands BSA whistleblower incentives and protections. Many of the statutory provisions in the AMLA will require additional rulemakings, reports and other measures, and the impact of the AMLA will depend on, among other things, rulemaking and implementation guidance. In June 2021, the Financial Crimes Enforcement Network, a bureau of the U.S. Department of the Treasury, issued the priorities for anti-money laundering and countering the financing of terrorism policy required under the AMLA. The priorities include corruption, cybercrime, terrorist financing, fraud, transnational crime, drug trafficking, human trafficking and proliferation financing.

The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 ("Patriot Act"), intended to combat terrorism, was renewed with certain amendments in 2006. In relevant part, the Patriot Act (1) prohibits banks from providing correspondent accounts directly to foreign shell banks; (2) imposes due diligence requirements on banks opening or holding accounts for foreign financial institutions or wealthy foreign individuals; (3) requires financial institutions to establish an anti-money laundering compliance program; and (4) eliminates civil liability for persons who file suspicious activity reports. The Patriot Act also includes provisions providing the government with power to investigate terrorism, including expanded government access to bank account records.

Regulators are directed to consider a bank holding company’s and a bank’s effectiveness in combating money laundering when reviewing and ruling on applications under the Bank Holding Company Act of 1956, as amended ("BHCA") and the Bank Merger Act. First Northwest and First Fed have established comprehensive compliance programs designed to comply with the requirements of the BSA and Patriot Act.

Consumer Protection Laws and Regulations. The Dodd-Frank Act, among other things, established the CFPB as an independent bureau of the Federal Reserve Board. The CFPB assumed responsibility for the implementation of the federal financial consumer protection and fair lending laws and regulations and has authority to impose new requirements. First Fed is subject to consumer protection regulations issued by the CFPB, but as a smaller financial institution, it is generally subject to supervision and enforcement by the FDIC with respect to our compliance with federal consumer financial protection laws and CFPB regulations. First Fed is also subject to supervision and enforcement by the DFI with respect to applicable state consumer protection laws and regulations. The CFPB has issued and continues to issue numerous regulations under which we may incur additional expense in connection with our ongoing compliance obligations.

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First Fed is subject to a broad array of federal and state consumer protection laws and regulations that govern almost every aspect of its business relationships with consumers. While the list set forth below is not exhaustive, some of these laws and regulations include the Truth-in-Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Home Mortgage Disclosure Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Right to Financial Privacy Act, the Home Ownership and Equity Protection Act, the Consumer Leasing Act, the Fair Credit Billing Act, the Homeowners Protection Act, the Check Clearing for the 21st Century Act, laws governing flood insurance, laws governing consumer protections in connection with the sale of insurance, federal and state laws prohibiting unfair and deceptive business practices, and various regulations that implement some or all of the foregoing. These laws and regulations mandate certain disclosure requirements and regulate the way financial institutions must deal with customers when taking deposits, making loans, collecting loans, and providing other services. In recent years, examination and enforcement by federal and state banking agencies for compliance with consumer protection laws and regulations have increased and become more intense. Failure to comply with these laws and regulations can subject First Fed to various penalties including, but not limited to, enforcement actions, injunctions, fines, civil liability, criminal penalties, punitive damages, and the loss of certain contractual rights. First Fed has established a comprehensive compliance system to promote compliance with applicable consumer protection laws and regulations.

Regulation and Supervision of First Northwest

General. First Northwest is a bank holding company registered with the Federal Reserve and the sole shareholder of First Fed. Bank holding companies are subject to comprehensive regulation by the Federal Reserve under the BHCA, and the regulations promulgated thereunder. This regulation and oversight is generally intended to ensure that First Northwest limits its activities to those allowed by law and that it operates in a safe and sound manner without endangering the financial health of First Fed. During 2022, First Northwest elected to be treated as a financial holding company (a type of bank holding company), allowing the Company to engage in non-banking activities that are financial in nature or incidental to financial activities.

Under the BHCA, First Northwest is supervised by the Federal Reserve. As a bank holding company, First Northwest is required to file semi-annual and annual reports with the Federal Reserve and any additional information required by the Federal Reserve and is subject to regular examinations by the Federal Reserve. The Federal Reserve also has extensive enforcement authority over bank holding companies, including the ability to assess civil money penalties, to issue cease-and-desist or removal orders and to require that a bank holding company divest subsidiaries (including its bank subsidiaries). In general, enforcement actions may be initiated for violations of law and regulations and/or for unsafe or unsound practices.

Source of Strength Doctrine. Under the Dodd-Frank Act and Federal Reserve policy, a bank holding company must serve as a source of financial and managerial strength to its subsidiary banks, and the Federal Reserve may expect a bank holding company to use available resources to provide adequate capital funds to its subsidiary banks during periods of financial stress or adversity (including at times when a bank holding company may not be in a financial position to provide such resources or when it may not be in the bank holding company’s or its shareholders' best interests to do so) and to maintain the financial flexibility and capital raising capacity to obtain additional resources for assisting its subsidiary banks.

Acquisitions. With certain exceptions, the BHCA prohibits a bank holding company from acquiring ownership or control of more than 5% of the voting shares of any company that is not a bank or bank holding company and from engaging in activities other than those of banking, managing or controlling banks, or providing services for its subsidiaries. The Federal Reserve may approve a bank holding company's ownership of another company which engages in activities closely related to the business of banking, as determined by the Federal Reserve. A bank holding company that meets certain supervisory and financial standards and elects to be designated as a financial holding company may also engage in certain securities, insurance and merchant banking activities, and other activities determined to be financial in nature or incidental to financial activities.

Regulatory Capital Requirements. As part of the review of applications under the BHCA and the supervision of bank holding companies, the Federal Reserve assesses the adequacy of a bank holding company's capital pursuant to the capital rules the Federal Reserve has adopted. These rules apply to bank holding companies with $3.0 billion or more in assets on a consolidated basis, or to bank holding companies with fewer assets but certain risky activities, or to bank-only companies. When applicable, the bank holding company capital adequacy and conservation buffer rules are the same as those imposed by the FDIC. For additional information, see the section above entitled "- Regulation of First Fed - Capital Requirements" and Note 12 of the Notes to Consolidated Financial Statements included in Item 8, "Financial Statements and Supplementary Data," of this Form 10-K.

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Interstate Banking. The BHCA, as amended by the interstate banking provisions of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 ("Interstate Act"), permits a bank holding company to acquire control of, or acquire all or substantially all of the assets of, a bank located in a state other than the bank holding company's home state, without regard to whether the transaction is prohibited by the laws of any state, subject to certain restrictions. The Interstate Act also generally permits national- and state-chartered banks to branch interstate through acquisitions of banks in other states, subject to certain restrictions.

Interchange Fees. Under the Durbin Amendment to the Dodd-Frank Act, the Federal Reserve adopted rules establishing standards for assessing whether the interchange fees that may be charged with respect to certain electronic transactions are "reasonable and proportional" to the costs incurred by issuers for processing such transactions. Notably, the Federal Reserve's rules set a maximum permissible interchange fee, among other requirements. As of December 31, 2025, First Northwest and First Fed qualified for the small issuer exemption from the Federal Reserve’s interchange fee cap, which applies to any debit card issuer that has total consolidated assets of less than $10 billion as of the end of the previous calendar year. In October 2023, the Federal Reserve requested comments on a proposed rule that would lower the interchange fee cap that applies to debit card issuers with $10 billion or more in assets and establish a regular process for updating the cap every other year going forward. Future changes to the interchange fee cap could have a negative effect on the Bank’s fee revenue.

Restrictions on Dividends. First Northwest's ability to declare and pay dividends is subject to the Federal Reserve limits and Washington law, and may also depend on its ability to receive dividends from First Fed, as discussed above.

The Federal Reserve has issued a policy statement on the payment of cash dividends by bank holding companies. In particular, the policy limits the payment of a cash dividend by a bank holding company if the holding company's net income for the past year is not sufficient to cover both the cash dividend and a rate of earnings retention that is consistent with capital needs, asset quality, and overall financial condition. A bank holding company that does not meet any applicable capital standard would not be able to pay any cash dividends under this policy. A bank holding company not subject to consolidated capital requirements is expected not to pay dividends unless its debt-to-equity ratio is less than 1:1, and it meets certain additional criteria. The Federal Reserve also has indicated that it would be inappropriate for a company experiencing serious financial problems to borrow funds to pay dividends.

Except for a company that meets the well-capitalized standard for bank holding companies, is well managed, and is not subject to any unresolved supervisory issues, a bank holding company is required to give the Federal Reserve prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10.0% or more of the company's consolidated net worth. The Federal Reserve may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation or regulatory order, condition, or written agreement.

Under Washington corporate law, First Northwest generally may not pay dividends if after that payment it would not be able to pay its liabilities as they become due in the usual course of business, or its total assets would be less than the sum of its total liabilities. These various laws and regulatory policies may affect First Northwest’s ability to pay dividends or otherwise engage in capital distributions.

Recent and Proposed Legislation. The economic and political environment of the past several years has led to a number of proposed legislative, governmental, and regulatory initiatives that may significantly impact the banking industry. Other regulatory initiatives by federal and state agencies may also significantly impact First Northwest's and First Fed’s business. First Northwest and First Fed cannot predict whether these or any other proposals will be enacted or the ultimate impact of any such initiatives on its operations, competitive situation, financial conditions, or results of operations.

Effects of Federal Government Monetary Policy. First Northwest’s earnings and growth are affected not only by general economic conditions, but also by the fiscal and monetary policies of the federal government, particularly the Federal Reserve. The Federal Reserve implements national monetary policy to promote maximum employment, stable prices, and moderate long-term interest rates. Through its open market operations in U.S. government securities, control of the discount rate applicable to borrowings, establishment of reserve requirements against certain deposits, and control of the interest rate applicable to excess reserve balances and reverse repurchase agreements, the Federal Reserve influences the availability and cost of money and credit and, ultimately, a range of economic variables including employment, output, and the prices of goods and services.

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The Federal Reserve has reaffirmed that its strategy for monetary policy is focused on long-term goals and addressing continued concerns with inflation. The Federal Reserve increased the federal funds rate by 100 basis points in 2023. In September 2024, the Federal Reserve reversed the upward trend and began lowering the federal funds rate for a total decrease in 2024 of 100 basis points with an additional total decrease in 2025 of 75 basis points. Changes in monetary policy, including changes in the federal funds rate, can affect net interest income and margin, overall profitability, and shareholders' equity. The nature and impact of future changes in monetary policies and their impact on First Northwest and First Fed cannot be predicted with certainty.

Cybersecurity. Federal banking regulators issue new guidance and standards, and update existing guidance and standards, intended to enhance cyber risk management among financial institutions from time to time. Financial institutions are expected to comply with such guidance and standards and to accordingly develop appropriate security controls and risk management processes. If First Fed fails to observe such regulatory guidance or standards, it could be subject to various regulatory sanctions, including financial penalties.

Interagency rules require banks to notify their primary banking regulator within 36 hours of determining that a "computer-security incident" rising to the level of a "notification incident" has occurred. Among other types of computer-security incidents, a "notification incident" includes one that has materially disrupted or degraded the banking organization’s ability to carry out banking operations to a material portion of its customer base in the ordinary course of business.

State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations. Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and many states, including Washington, have also recently implemented or modified their data breach notification, information security and data privacy requirements. We expect this trend of state-level activity in those areas to continue, and are continually monitoring developments in the states in which our customers are located.

Risks and exposures related to cybersecurity attacks, including litigation and enforcement risks, are expected to be elevated for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as the expanding use of internet banking, mobile banking and other technology-based products and services by us and our customers. Cybersecurity concerns are further heightened by Russia's current invasion of Ukraine.

In addition to guidance and standards implemented by banking regulators, in July 2023, the SEC adopted final rules requiring an annual disclosure of registrants’ cybersecurity risk management strategy and governance. Additionally, registrants are required to disclose cybersecurity incidents, including the nature, scope, timing, and impact of the incident, within four business days of determining them to be material.

Taxation

Federal Taxation

General. First Northwest and First Fed are subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below. The following discussion of federal taxation is intended only to summarize certain pertinent federal income tax matters and is not a comprehensive description of the tax rules applicable to First Northwest or First Fed. First Fed is no longer subject to U.S. federal income tax examinations by tax authorities for years ended before December 31, 2022. See Note 10 of the Notes to Consolidated Financial Statements included in Item 8, "Financial Statements and Supplementary Data," of this Form 10-K.

Method of Accounting. For federal income tax purposes, we currently report income and expenses on the accrual method of accounting. Federal income tax returns are filed using a December 31 year end.

Intercompany Dividends-Received Deduction. First Northwest will file a consolidated federal income tax return with First Fed. Accordingly, any dividends First Northwest receives from First Fed will not be included as income to First Northwest.

Washington Taxation

First Northwest and First Fed are subject to a business and occupation tax imposed under Washington law at the rate of 2.10% of gross receipts, as well as personal property and sales tax. Interest received on loans secured by mortgages or deeds of trust on residential properties and certain investment securities are exempt from this tax.

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