Executive Summary

Q2 2025 returned to profitability: net income $3.66M ($0.42 EPS) vs. Q1 2025 net loss $(9.04)M (revised for a ~$5.8M legal reserve) and Q2 2024 net loss $(2.22)M; Adjusted PPNR rose for a fifth straight quarter to $2.09M, and NIM expanded 7 bps to 2.83% .
Mixed vs. estimates: S&P Global Primary EPS beat ($0.26* actual vs. $0.10* consensus) while revenue was modestly below ($16.12M* actual vs. $16.70M* consensus). Company-reported Q2 EPS was $0.42 and GAAP total revenue was $16.36M .
Expense tailwinds and credit stabilization aided results: a $2.6M Employee Retention Credit (offset by $0.53M consulting) lowered compensation; provision was a $0.30M recapture aided by $1.1M commercial loan recoveries; noninterest expense fell $7.2M q/q after the prior quarter’s legal reserve .
Capital and funding improved in mix: CET1 12.1% and TRBC 13.1%; customer deposits +$19.6M while brokered CDs −$31.0M; money market balances +14% q/q; book value/share $15.85 .
Board did not declare a Q2 dividend (prudent capital stance), after having paid $0.07/share in Q2 (for the Q1 declaration); CEO transition to Interim CEO Geraldine Bullard is underway; one legal matter settled July 21 and a separate proceeding continues—both key near‑term catalysts .

What Went Well and What Went Wrong

What Went Well

Margin and core earnings momentum: NIM expanded 7 bps q/q to 2.83%, and Adjusted PPNR rose to $2.09M (5th consecutive quarterly increase), underscoring progress on core profitability levers .
Deposit mix improved: customer deposits +$19.6M while brokered CDs −$31.0M in Q2; money market balances +14.2% q/q; cost of deposits benefited from rate actions .
Credit stabilization: provision recapture of $0.30M on $1.1M of commercial loan recoveries; ACLL ratio fell to 1.10% as individually evaluated reserves were released, and classified loans edged down q/q .

Management quote: “Our second quarter included continued modest improvement… seven basis points of net interest margin expansion and our fifth consecutive quarter of growing Adjusted PPNR… loan recoveries totaling $1.1 million drove a modest provision release” — Interim CEO Geraldine Bullard .

What Went Wrong

Noninterest income normalization: down $1.6M q/q to $2.2M given Q1’s nonrecurring $1.1M BOLI death benefit and $0.85M gain on extinguishment of debt not repeating .
Continued deposit pricing competition: overall deposits −$11.4M q/q as the bank purposely ran down higher-cost brokered CDs; competitive deposit markets persist .
Asset quality still a watch area: nonperforming loans steady at $20.4M; one $4.1M CRE loan migrated to nonaccrual; ACLL to NPLs declined to 90% from 101% q/q; four collateral-dependent loans comprise ~77% of classified loans .

Financial Results

P&L summary, margins, and EPS vs. prior periods and estimates (USD)

Metric	Q2 2024	Q4 2024	Q1 2025 (revised)	Q2 2025	Q2 2025 SPGI Consensus*
Total Revenue (GAAP) ($M)	21.58	15.44	17.62	16.36	16.70*
Net Interest Income ($M)	14.24	14.14	13.85	14.19	—
Noninterest Income ($M)	7.35	1.30	3.78	2.17	—
Noninterest Expense ($M)	15.61	14.23	20.00	12.77	—
Net Income ($M)	(2.22)	(2.81)	(9.04)	3.66	—
Diluted EPS (Company) ($)	(0.25)	(0.23)	(1.03)	0.42	—
Primary EPS (SPGI) ($)	—	—	—	0.26*	0.10*
Net Interest Margin (%)	2.80	2.73	2.76	2.83	—
Efficiency Ratio (%)	96.40	92.2	113.5	78.0	—
ROAA (%)	(0.50)	(0.51)	(1.69)	0.68	—

Notes: Q1 2025 figures reflect a previously disclosed ~$5.8M legal reserve recorded in Q1; earlier April 24 8‑K had reported $1.5M net income and $0.17 EPS pre-reserve .
SPGI Primary EPS and revenue reflect S&P Global definitions; company-reported EPS and GAAP total revenue differ due to methodology and nonrecurring items .

Credit and balance-sheet KPIs

KPI	Q2 2024	Q4 2024	Q1 2025	Q2 2025
ACLL ($M)	19.34	20.45	20.57	18.35
ACLL / Total Loans (%)	1.14	1.21	1.24	1.10
Nonaccrual Loans ($M)	23.63	30.52	20.39	20.37
Annualized NCOs / Avg Loans (%)	1.70	1.23	1.87	0.47
CET1 Ratio (Bank) (%)	12.4	12.4	12.1	12.1
Total Risk-Based (Bank) (%)	13.5	13.6	13.4	13.1
Total Deposits ($B)	1.708	1.688	1.666	1.655
Brokered CDs ($M)	223.7	182.9	137.9	106.9
Money Market ($M)	423.0	413.8	424.5	484.8

Adjusted PPNR trend (Non-GAAP)

Metric ($M)	Q2 2024	Q4 2024	Q1 2025	Q2 2025
Adjusted PPNR	0.53	1.43	1.47	2.09

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Dividend per share	Q2 2025	$0.07/share declared for Q1 2025 (paid May 23, 2025)	Board did not declare a dividend for Q2 2025	Lowered/suspended this quarter
Occupancy expense (rent)	Forward run-rate	N/A	Seattle center consolidation expected to reduce annual rent expense by ~$130k	New cost reduction
ERC carryforward recognition	2028	N/A	Bank anticipates recording remaining reserved ERC of ~$2.0M in 2028	Timing disclosed
Share repurchases	Q2 2025	846,123 shares authorized remaining at Q1; no repurchases in Q1	No repurchases in Q2; 846,123 shares remain available	Maintained pause

No formal revenue, margin, or EPS guidance was issued in the Q2 materials .

Earnings Call Themes & Trends

No Q2 2025 earnings call transcript was available in the document set; themes below synthesize the company’s Q2 release with Q1 and Q4 updates.

Topic	Q4 2024 (prior)	Q1 2025 (prior)	Q2 2025 (current)	Trend
Net interest margin and balance sheet actions	NIM 2.73%; reduced borrowings; hedging reduced liability sensitivity; reinvested BOLI and purchased higher‑yield securities	NIM 2.76%; cost of funds declined; continued mix shift away from brokered deposits; Northpointe MPP runoff	NIM 2.83%; asset yields up and lower rates on interest‑bearing liabilities	Improving
Deposit mix and pricing	Total deposits −$23.6M; offered specials amid competition	Customer deposits +$23M; brokered −$45M	Customer deposits +$19.6M; brokered −$31.0M; money market +14% q/q	Mix improving; competition persists
Credit costs and asset quality	Elevated charge-offs; ACLL/NPL coverage fell; classified loans high but being worked out	Provision $1.6M; NPLs −13.5% q/q; classified −$4.7M	Provision recapture $0.30M; recoveries $1.1M; one $4.1M CRE to NPL; classified ↓ slightly	Stabilizing with pockets of risk
Nonrecurring items	Equity write-down; BOLI death benefit; opex reductions vs. Q3	BOLI death benefit, debt extinguishment gain, equity conversion gain	ERC $2.6M credit (offset by $0.53M consulting) and $0.60M lease termination cost; prior quarter had $5.8M legal reserve	Nonrecurring shifting from income headwinds to tailwinds
Leadership & governance	—	—	CEO transition to Interim CEO G. Bullard (July 9); new director Diane Davis (July 23)	Leadership transition underway
Legal matters	—	10‑Q included legal matters; later, reserve recorded in Q1 (reflected in Q2 tables)	Settlement reached on one matter (July 21); separate proceeding continues	De‑risking with residual uncertainty

Management Commentary

Chair Cindy Finnie: “We… strongly dispute the allegations contained in the legal proceedings disclosed in our June 13, 2025, 8‑K and intend to vigorously defend against them… the Board remains focused on the strategic objectives of the Bank, building on the positive core trends from the past few quarters.” .
Interim CEO Geraldine Bullard: “Seven basis points of net interest margin expansion and our fifth consecutive quarter of growing Adjusted PPNR… Commercial business loan recoveries totaling $1.1 million drove a modest provision release… loans growing 3% annualized… total deposits only down modestly despite a $31.0 million reduction in brokered time deposits.” .
On operations: Consolidation of business centers into a Seattle business center, one‑time $0.60M cost, expected ~$130k annual rent savings .
On ERC: $2.6M recorded as compensation reduction in Q2; $0.53M related consulting expense; remaining $2.0M expected in 2028 .

Q&A Highlights

No earnings call transcript was available in the document set; therefore, no Q&A highlights or clarifications were accessible for Q2 2025 [ListDocuments showed none].

Estimates Context

EPS: S&P Global Primary EPS actual $0.26* vs. $0.10* consensus — beat. Company-reported diluted EPS was $0.42, with the delta vs. SPGI “Primary EPS” likely reflecting methodology and nonrecurring items (e.g., ERC credit, legal reserve timing) .
Revenue: S&P Global revenue actual $16.12M* vs. $16.70M* consensus — modest miss; company GAAP total revenue was $16.36M .

Metric	Q2 2025 Actual (Company)	Q2 2025 Actual (SPGI)*	Q2 2025 Consensus (SPGI)*
EPS ($)	0.42	0.26*	0.10*
Revenue ($M)	16.36	16.12*	16.70*

Values retrieved from S&P Global.*

Key Takeaways for Investors

Profitability returned with margin uptick and expense tailwinds; core earnings momentum is visible (Adjusted PPNR up to $2.09M) despite normalizing fee income .
The quarter benefited from unusual items (ERC credit net of consulting and lease termination), while the prior quarter was weighed by a ~$5.8M legal reserve—modeling should separate these to assess sustainable run‑rate .
Funding mix is improving (brokered CDs down, customer deposits up), but pricing competition persists; deposit beta management remains a key lever for NIM stabilization .
Credit quality is stabilizing with recoveries and lower NCOs, but watch single‑name concentrations in collateral‑dependent credits and the new $4.1M CRE nonaccrual; reserve coverage dipped to 90% of NPLs .
Leadership transition and legal developments are near‑term catalysts; one matter settled, another continues—resolution progress could reduce overhang, while CEO search outcome may signal future strategic direction .
Capital remains solid (CET1 12.1%, TRBC 13.1%), supporting flexibility; however, the Board’s decision not to declare a Q2 dividend signals prudence until earnings durability is clearer .
Estimate revisions: Expect upward EPS revisions for Q2 actual beat but mixed adjustments to forward revenue/margin depending on deposit pricing trajectory and pace of credit resolution (SPGI EPS/revenue data above). Values retrieved from S&P Global.*

Citations: Q2 2025 8‑K/press release and exhibits ; Q2 2025 press release mirror –, –; Q1 2025 8‑K –, –; Q4 2024 8‑K –, –; CEO transition PR ; Director appointment PR .

First Northwest Bancorp (FNWB)·Q2 2025 Earnings Summary