On Tuesday, Piper Sandler adjusted the price target for First Northwest Bancorp (NASDAQ:FNWB), increasing it to $11.50 from the previous $11.00. The firm maintained a Neutral rating on the company's stock. This adjustment follows a review of the company's second-quarter performance, which was marked by challenges in core earnings due to unfavorable credit migrations that led to a higher Loan Loss Provision (LLP) and softer core fee income, partly due to some Fair Value (FV) write-downs.
Despite these challenges, Piper Sandler noted positive steps taken by First Northwest Bancorp aimed at enhancing profitability. These steps include a branch sale-leaseback, a partial securities restructuring during the second quarter, and a recently announced 9% Reduction in Force (RIF). The company's long-term prospects for growing commercial market share across the Puget Sound region were also highlighted as a reason for encouragement.
However, the firm's outlook for First Northwest Bancorp remains cautious due to the bank's below-average profitability forecast and the uncertain timing surrounding the resolution of its consent order. Additionally, recent concerns related to credit were cited as a reason for the maintained Neutral stance.
Piper Sandler has revised its earnings estimates for First Northwest Bancorp, lowering the 2024 estimate to $0.00, a decrease of $0.50, following the second-quarter core earnings shortfall. Conversely, the 2025 earnings estimate was increased to $1.20 from the previous $1.10, reflecting an improved Net Interest Margin (NIM) and operating expense outlooks.
The new price target of $11.50 represents a slight increase and is based on 0.65 times the firm's one-year forward Tangible Book Value (TBV) estimate, which remains unchanged. This valuation continues to imply a discount to peer companies, which typically trade at around 1.2 times TBV, due to the factors mentioned above.
In other recent news, First Northwest Bancorp, the parent company of First Fed Bank, has promoted Kyle Henderson to Chief Credit Officer. Henderson, who has over 16 years of experience in the financial services sector, succeeds Terry Anderson following his retirement. The company's management expressed confidence in Henderson's abilities due to his established track record and the trust he has earned from customers and the team.
In addition to this internal development, First Northwest Bancorp has experienced modifications to its stock target by Piper Sandler, which revised the price target down to $12.00 from the previous $17.00, while maintaining a Neutral rating on the stock.
The firm's decision comes after First Northwest Bancorp's first-quarter results that showed modest profitability. Piper Sandler also adjusted its 2024 earnings per share estimate for the company downward to $0.50 from the prior $0.70 estimate but maintains its 2025 earnings per share estimate at $1.10.
InvestingPro Insights
First Northwest Bancorp (NASDAQ:FNWB) has been navigating a challenging financial landscape, as reflected in the recent adjustments by Piper Sandler. To provide a more comprehensive understanding of the company's current position, InvestingPro data shows a market capitalization of $89.81M, underscoring its relatively small size in the banking sector. The bank's P/E ratio stands at a negative -75.11, which may raise concerns about its valuation compared to earnings. However, the PEG Ratio of 0.68 suggests that investors could be expecting future growth relative to the earnings decline.
An InvestingPro Tip highlights the company's high shareholder yield, which may be attractive to investors seeking income in addition to potential stock price appreciation. On the flip side, First Northwest Bancorp's weak gross profit margins and lack of profitability over the last twelve months are areas that require attention. Yet, there is a silver lining as analysts predict the company will turn profitable this year, which could signal a turning point for the bank.
For readers looking to delve deeper into First Northwest Bancorp's prospects, there are additional InvestingPro Tips available, which can be accessed through the platform. Use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and discover more insights that could inform your investment decisions.
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