DEF 14A of First Northwest Bancorp
Filed Apr 19, 20240001437749-24-012498
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(Amendment No. ) Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐ Check the appropriate box:
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| ☐ | Preliminary Proxy Statement | | ☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | | ☒ | Definitive Proxy Statement | | ☐ | Definitive Additional Materials | | ☐ | Soliciting Material Pursuant to §240.14a-12 | | FIRST NORTHWEST BANCORP | | | (Name of registrant as specified in its charter) | | | (Name of person(s) filing proxy statement, if other than the registrant) | | | Payment of Filing Fee (Check the appropriate box): | | | ☒ | No fee required. | | ☐ | Fee paid previously with preliminary materials. | | ☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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LETTER FROM OUR PRESIDENT AND CEO April 19, 2024 DEAR SHAREHOLDER: On behalf of the Board of Directors and management of First Northwest Bancorp, you are cordially invited to the 2024 Annual Meeting of Shareholders. This year’s meeting will be held in-person at 4:00 p.m. (Pacific Time) on Thursday, May 30, 2024. The meeting will be held at Field Arts and Events Hall, 201 W. Front Street, Port Angeles, Washington 98362. The attached Proxy Statement discusses each matter expected to be voted on at this year’s Annual Meeting of Shareholders, which the Board of Directors and management team encourage you to attend. In addition to voting on the proposed items, our team will present a brief report on current operations and provide an opportunity for you to have your questions and comments addressed. Whether or not you participate in the Annual Meeting, it is important that your shares be represented and voted. We urge you to promptly vote and submit your proxy (1) via the Internet, (2) by phone, or (3) if you received your proxy materials by mail, by signing, dating, and returning the enclosed proxy card or voting instruction form in the envelope provided for your convenience. While 2023 presented several challenges related to record increases to interest rates, it also provided the once in a lifetime opportunity to celebrate First Fed Bank’s 100 years of dedication to the communities we serve. Thank you to everyone that helped us celebrate our centennial. Looking forward, we continue to navigate the challenges facing the banking industry nationwide and maintain disciplined focus on our customers, shareholders, employees, and communities. We appreciate your continued interest and support. Sincerely,
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| | Matthew P. Deines President and Chief Executive Officer |
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS The Board of Directors of First Northwest Bancorp (the “Board”) is distributing this Proxy Statement to solicit proxies from our shareholders for use at our 2024 Annual Meeting of Shareholders. We first provided electronic access to this Proxy Statement, a form of proxy card, and our Annual Report to our shareholders on or about April 19, 2024.
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| Meeting Date: May 30, 2024 | Meeting Location: | Field Arts and Events Hall | | | | 201 W. Front Street | | Meeting Time: 4:00 p.m. (Pacific Time) | | Port Angeles, Washington 98362 | | Record Date: March 22, 2024 | | |
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This year’s Annual Meeting will return to an in-person format. You will be able to attend and participate in the Annual Meeting at the time, date, and location shown above. All meeting attendees will be required to comply with local and state health requirements for public meetings. ANNUAL MEETING BUSINESS PROPOSAL 1 - Election of ten directors to serve a one-year term; PROPOSAL 2 - Approval of the Second Amended and Restated Articles of Incorporation of First Northwest Bancorp to remove supermajority voting provisions and permit removal of directors by the shareholders with or without cause; PROPOSAL 3 - An advisory (non-binding) vote to approve the compensation of our named executive officers, as disclosed in this Proxy Statement; and PROPOSAL 4 - Ratification of the appointment of Moss Adams LLP as our independent registered public accounting firm for the year ending December 31, 2024. YOUR VOTE IS IMPORTANT. We urge you to read this Proxy Statement carefully. Whether or not you plan to attend the Annual Meeting, we urge you to vote promptly through the Internet, by telephone, or by mail. This will ensure the presence of a quorum at the meeting. For instructions on voting, please refer to the instructions on the Notice of Internet Availability of Proxy Materials you received in the mail. You can request to receive proxy materials by mail or e-mail as well. Promptly voting your shares via the Internet, by telephone, or by signing, dating, and returning the proxy card or voting instruction form will save us the expense and extra work of additional solicitation. If you are a shareholder of record and vote at the Annual Meeting, your proxy will not be used. By Order of the Board of Directors Allison R. Mahaney, SVP General Counsel / Corporate Secretary Port Angeles, Washington
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| PROXY SUMMARY | 1 | | CORPORATE GOVERNANCE SUMMARY | 3 | | PRINCIPAL SHAREHOLDERS | 4 | | BENEFICIAL OWNERSHIP BY DIRECTORS AND NAMED EXECUTIVE OFFICERS | 5 | | PROPOSAL 1 Election of Directors | 6 | | Information Regarding Nominees for Election | 9 | | CORPORATE GOVERNANCE AND BOARD MATTERS | 13 | | DIRECTOR COMPENSATION | 17 | | EXECUTIVE COMPENSATION | 18 | | Summary Compensation Table | 20 | | Cash Incentive Compensation | 20 | | Pay Versus Performance | 22 | | Outstanding Equity Awards | 23 | | Retirement Benefits | 24 | | Employment Agreements for Named Executive Officers | 25 | | PPROPOSAL 2 Approval of Second Amended and Restated Articles of Incorporation | 27 | | PROPOSAL 3 Advisory Vote to Approve Executive Compensation | 28 | | AUDIT COMMITTEE REPORT | 29 | | PROPOSAL 4 Ratification of Appointment of Independent Auditor | 30 | | SHAREHOLDER PROPOSALS | 31 | | QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING | 32 | | DELINQUENT SECTION 16(A) REPORTS | 35 | | MISCELLANEOUS | 35 |
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The information provided in this Proxy Statement relates to First Northwest Bancorp and its wholly owned subsidiary, First Fed Bank. First Northwest Bancorp may also be referred to as “First Northwest” and First Fed Bank may also be referred to as “First Fed” or the “Bank.” References to “we,” “us,” and “our” refer to First Northwest and, as the context requires, First Fed. PROXY SUMMARY This summary highlights information contained elsewhere in this Proxy Statement and does not contain all the information you should consider before casting your vote. Please read this entire Proxy Statement carefully before voting. On or about April 19, 2024, we provided electronic access to our proxy materials and mailed to our shareholders the Notice of Availability of Proxy Materials, which contains instructions on how to access the Proxy Statement and our Annual Report via the Internet and how to vote online.
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| Information About the Annual Meeting | DATE Thursday, May 30, 2024 | TIME 4:00 p.m. (Pacific Time) | LOCATION 201 W. Front Street Port Angeles, Washington 98362 | | How to Vote | BY INTERNET Vote your shares at www.proxydocs.com/FNWB | BY PHONE Call toll-free number at 1-866- 256-0967 | BY MAIL Mark, sign and date your proxy card in the enclosed envelope |
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MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING At the meeting, you will be asked to consider and vote upon the following proposals:
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| MATTER | | BOARD VOTE RECOMMENDATION | PAGE REFERENCE (FOR MORE DETAIL) | | Proposal 1 | Election of ten directors to serve a one-year term; | FOR each nominee | 6 | | Proposal 2 | Approval of the Second Amended and Restated Articles of Incorporation of First Northwest Bancorp to remove supermajority voting provisions and permit removal of directors by the shareholders with or without cause; | FOR | 27 | | Proposal 3 | An advisory (non-binding) vote to approve the compensation of our named executive officers, as disclosed in this Proxy Statement; and | FOR | 28 | | Proposal 4 | Ratification of the appointment of Moss Adams LLP as our independent registered public accounting firm for the year ending December 31, 2024. | FOR | 30 |
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| 2023 BUSINESS HIGHLIGHTS |
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In 2023, First Northwest maintained a disciplined focus on investing in solutions to add value for our customers and communities despite the challenging and unique business climate. BOARD NOMINEES
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| NAME | GENDER | AGE AS OF DECEMBER 31, 2023 | YEAR FIRST ELECTED OR APPOINTED DIRECTOR | | Sherilyn G. Anderson | Female | 64 | 2020 | | Dana D. Behar | Male | 61 | 2015 | | Sean P. Brennan | Male | 62 | 2024 | | Craig A. Curtis | Male | 63 | 2014 | | Matthew P. Deines | Male | 50 | 2019 | | Cindy H. Finnie | Female | 73 | 2012 | | Gabriel S. Galanda | Male | 47 | 2021 | | Lynn A. Terwoerds | Female | 59 | 2023 | | Norman J. Tonina, Jr. | Male | 59 | 2013 | | Jennifer Zaccardo | Female | 71 | 2011 |
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DIRECTORS’ CORE COMPETENCIES Out of 10 Director Nominees
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| CORPORATE RESPONSIBILITY SUMMARY |
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CORPORATE RESPONSIBILITY First Northwest Bancorp is dedicated to long-term community sustainability and business growth. We know good corporate citizenship not only enhances our ability to pursue business opportunities and manage risks across our business, but also supports our values in addressing many of the challenges faced by our stakeholders. A summary of our recent activities to improve the lives of those we serve is included below.
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| | OUR PEOPLE First Northwest recognizes that empathy and inclusion in our workforce is critical to our success. Appreciation of the circumstances of others and seeking to understand the obstacles and challenges that is their lived experience is the basis of empathy and is essential for valuing and including every member of our communities. The table below represents self-reported employee racial and ethnic identity and gender identity information across our workforce on the reference dates. |
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| | | Q4 2020 | | Q4 2021 | | Q4 2022 | | Q4 2023 | | TOTAL BY YEAR | NUMBER | PERCENT OF TOTAL | NUMBER | PERCENT OF TOTAL | NUMBER | PERCENT OF TOTAL | NUMBER | PERCENT OF TOTAL | | American Indian | 3 | 1.3 | 5 | 1.7 | 6 | 2.1 | 2 | -0.7 | | Asian | 6 | 2.6 | 12 | 4.2 | 11 | 3.9 | 11 | 4.1 | | Black or African American | 1 | 0.5 | 3 | 1.1 | 6 | 2.1 | 8 | 3.0 | | Hispanic or Latino | 12 | 5.3 | 12 | 4.2 | 11 | 3.9 | 12 | 4.4 | | Native Hawaiian/Pacific Islander | 0 | 0.0 | 0 | 0.0 | 0 | 0 | 1 | 0.4 | | 2 or More Races | 18 | 7.9 | 25 | 8.7 | 20 | 7.0 | 23 | 8.5 | | White | 185 | 81.1 | 228 | 79.4 | 229 | 80.6 | 212 | 78.5 | | Not Specified | 3 | 1.3 | 2 | 0.7 | 1 | 0.4 | 1 | 0.4 | | All Non-White | 40 | 17.5 | 57 | 19.9 | 54 | 19.0 | 57 | 21.1 | | Female | 155 | 68.0 | 199 | 69.3 | 196 | 69.0 | 185 | 68.5 | | Male | 73 | 32.0 | 88 | 30.7 | 88 | 31.0 | 85 | 31.5 |
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| | OUR COMMUNITY | | | | | | | | We are proud to report that First Northwest’s 2023 commitment to our communities was realized through: | | | | • | 6,000 hours of employee-donated volunteering for local organizations; | | | • | $600,000 in funding from the First Fed Foundation to local organizations; and | | | • | 220 in-kind donations, sponsorships, and financial support contributions to organizations in our communities, from youth sports to capital fundraising campaigns. | | | OUR GOVERNANCE CULTURE | | | | | | | | First Northwest’s ongoing commitment to corporate excellence shows in our continued efforts to manage our operations for the long-term benefit of all stakeholders. In doing so, we continue to strengthen the communities we serve. Some of our 2024 corporate governance highlights include: | | | | • | Increasing Board diversity; | | | • | Continued review and improvement of governance programs and policies; and | | | • | Board recommendation to shareholders regarding removal of the supermajority shareholder voting provisions. |
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| PRINCIPAL SHAREHOLDERS |
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PRINCIPAL SHAREHOLDERS Persons and groups beneficially owning more than five percent of First Northwest’s outstanding shares of common stock (“5% Beneficial Owners”) are required to file reports with the Securities and Exchange Commission (the “SEC”) disclosing their ownership. The following table lists all 5% Beneficial Owners known to management as of the record date for the Annual Meeting, March 22, 2024 (the “Record Date”):
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| NAME AND ADDRESS | NUMBER OF SHARES BENEFICIALLY OWNED | PERCENT OF SHARES OUTSTANDING (%) | | Fourthstone LLC 575 Maryville Centre Drive, Suite 110 St. Louis, Missouri 63141 | 893,754(1) | 9.46 | | First Northwest Bancorp Employee Stock Ownership Plan 105 W. Eighth Street Port Angeles, Washington 98362 | 936,540(2) | 9.92 | | FMR LLC 245 Summer Street Boston, Massachusetts 02110 | 864,697(3) | 9.16 | | Private Capital Management, LLC 8889 Pelican Bay Boulevard, Suite 500 Naples, Florida 34108 | 795,900(4) | 8.43 | | First Fed Foundation(5) 105 W. Eighth Street Port Angeles, Washington 98362 | 487,161 | 5.16 |
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| (1) Based on information provided by Fourthstone LLC to First Northwest, Fourthstone LLC and L. Phillip Stone, IV, shared voting and dispositive power as to 893,754 shares of common stock as of March 22, 2024. In a schedule 13G filed by Fourthstone LLC on February 14, 2024, Fourthstone Master Opportunity Fund Ltd. reported shared voting and dispositive power as to 714,789 of the shares beneficially owned by Fourthstone LLC, or 7.57% of the outstanding shares of common stock on the Record Date. |
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| (2) As of December 31, 2023, the ESOP had sole voting power as to 608,855 shares, shared voting power with respect to 327,685 shares, and shared dispositive power with respect to 936,540 shares. The ESOP provides for pass-through voting as to shares allocated to ESOP participants. The trustee for the ESOP will vote all shares as to which participants have not provided voting instructions in the same proportions as the shares as to which the trustee received timely instructions from participants. |
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| (3) Based on information contained in the schedule 13G/A filed on February 9, 2024, reporting sole voting and dispositive powers as to all shares by FMR LLC and sole voting power as to all shares by Abigail P. Johnson, as a Director, the Chairman and Chief Executive Officer of FMR LLC. |
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| (4) Based on information contained in the schedule 13G/A filed on February 5, 2024, reporting sole voting and dispositive power as to 237,891 shares and shared voting and dispositive power as to 558,009 shares. |
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| (5) We established the First Fed Foundation in connection with the mutual to stock conversion of First Fed in 2015 to further our commitment to the local community. Shares of common stock held by the Foundation as of the Record Date will be voted in the same proportions as all shares of common stock voted on all proposals by First Northwest’s other shareholders. |
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| BENEFICIAL OWNERSHIP BY DIRECTORS AND NAMED EXECUTIVE OFFICERS |
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BENEFICIAL OWNERSHIP BY DIRECTORS AND NAMED EXECUTIVE OFFICERS The following table sets forth information, as of the Record Date, regarding share ownership of our directors, each executive officer of First Northwest or First Fed named in the Summary Compensation Table appearing under “Executive Compensation” below (referred to as “named executive officers”), and all current directors and executive officers of First Northwest and First Fed as a group. Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In accordance with Rule 13d-3 of the Securities Exchange Act of 1934 (the “Exchange Act”), a person is deemed to be the beneficial owner of any shares of common stock if he or she has voting or dispositive power with respect to those shares. Therefore, the table below includes shares held by spouses, by other immediate family members in trust, in retirement accounts or funds for the benefit of the named individuals, and in the ESOP and 401(k) Plan. As of the Record Date, there were 9,443,271 shares of First Northwest common stock outstanding
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| NAME | NUMBER OF SHARES BENEFICIALLY OWNED | PERCENT OF SHARES OUTSTANDING (%) | | Directors | | | | Sherilyn G. Anderson | 10,042(1) | * | | Dana D. Behar | 55,467(2) | * | | Sean P. Brennan | 0(3) | * | | Craig A. Curtis | 27,807(4) | * | | Cindy H. Finnie | 37,029(5) | * | | Gabriel S. Galanda | 6,814(6) | * | | Lynn A. Terwoerds | 6,424(7) | * | | Norman J. Tonina, Jr. | 35,305(8) | * | | Jennifer Zaccardo | 38,364(9) | * | | Named Executive Officers | | | | Matthew P. Deines** | 104,811(10) | 1.11 | | Christopher W. Neros | 13,220(11) | * | | Christopher J. Riffle | 39,280(12) | * | | All current directors and executive officers as a group (16 persons) | 466,044(13) | 4.94 |
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| * Less than one percent of shares outstanding. |
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| ** Mr. Deines is also a Director of First Northwest. |
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| (1) Includes 1,476 shares of restricted stock as to which Ms. Anderson has voting power. |
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| (2) Includes 19,852 shares held jointly with spouse and 1,476 shares of restricted stock as to which Mr. Behar has voting power. |
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| (3) Mr. Brennan joined the Board on March 26, 2024, after the Record Date. |
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| (4) Includes 6,340 shares held jointly with spouse and 1,476 shares of restricted stock as to which Mr. Curtis has voting power. |
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| (5) Includes 1,476 shares of restricted stock as to which Ms. Finnie has voting power. |
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| (6) Includes 2,418 shares of restricted stock as to which Mr. Galanda has voting power. |
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| (7) Includes 3,625 shares of restricted stock as to which Ms. Terwoerds has voting power. |
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| (8) Includes 1,476 shares of restricted stock as to which Mr. Tonina has voting power. |
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| (9) Includes 1,476 shares of restricted stock as to which Ms. Zaccardo has voting power. |
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| (10) Includes 20,860 shares of restricted stock as to which Mr. Deines has voting power 4,160 units held in the 401(k) Plan, and 2,796 shares held in the ESOP. |
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| (11) Includes 11,329 shares of restricted stock as to which Mr. Neros has voting power. |
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| (12) Includes 7,233 shares of restricted stock as to which Mr. Riffle has voting power, and 4,832 shares held in the ESOP. |
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| (13) Includes a total of 26,671 shares of restricted stock as to which four additional executive officers have voting power, as well as 3,505 units held in the 401(k) Plan, and 11,419 shares held in the ESOP for their account. Units consist of shares of First Northwest common stock and a liquidity cash component. |
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ELECTION OF DIRECTORS Our Board of Directors (the “Board”) consists of ten members, each of whom has been nominated for election at the Annual Meeting. The table below sets forth information regarding each nominee for director. All nominees are also directors of First Fed. The Nominating and Corporate Governance Committee of the Board selects nominees for election as directors and presents its nominees to the Board for consideration. All nominees currently serve as First Northwest directors. Each nominee has consented to being named in this Proxy Statement and has agreed to serve if elected. It is intended that the proxies solicited on behalf of the Board (other than proxies in which the vote is withheld as to the nominee) will be voted at the Annual Meeting for the election of the nominees identified in the table below. If a nominee is unable to stand for election, the Board may either reduce the number of directors to be elected or select a substitute nominee. If a substitute nominee is selected, the proxy holders will vote your shares for the substitute nominee, unless you have withheld authority. At this time, we are not aware of any reason why a nominee might be unable to serve if elected. Directors are elected by a plurality of the votes cast, individually or by proxy, at the Annual Meeting by holders of First Northwest common stock. Accordingly, the ten nominees for election as directors who receive the highest number of votes cast will be elected. Our Articles of Incorporation do not permit shareholders to cumulate their votes for the election of directors. Votes may be cast for or withheld from each nominee. Votes that are withheld and broker non-votes will have no effect on the outcome of the election because the ten nominees receiving the greatest number of votes will be elected.
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| NAME | GENDER | AGE AS OF DECEMBER 31, 2023 | YEAR FIRST ELECTED OR APPOINTED DIRECTOR | | Sherilyn G. Anderson | Female | 64 | 2020 | | Dana D. Behar | Male | 61 | 2015 | | Sean P. Brennan | Male | 62 | 2024 | | Craig A. Curtis | Male | 63 | 2014 | | Matthew P. Deines | Male | 50 | 2019 | | Cindy H. Finnie | Female | 73 | 2012 | | Gabriel S. Galanda | Male | 47 | 2021 | | Lynn A. Terwoerds | Female | 59 | 2023 | | Norman J. Tonina, Jr. | Male | 59 | 2013 | | Jennifer Zaccardo | Female | 71 | 2011 |
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| (1) For years prior to 2015, includes service on the Board of Directors of First Fed. |
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| COMMITMENT TO DIVERSITY |
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| | | | Gender Diversity | Racial / Ethnic Diversity | | 4 of 10 directors identify as female | 3 of 10 directors identify as racially or ethnically diverse |
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| 61 YEARS | 30% | 30% | 6 YEARS | | Average Age | Racially/Ethnically Diverse | Board Diversity | Average Tenure |
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BOARD DIVERSITY MATRIX The following table identifies the self-reported gender identity and demographic background of our Board as of the Record Date.
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| Total Number of Directors: | 10 | | | | | PART I: GENDER IDENTITY | FEMALE | MALE | NON- BINARY | DID NOT DISCLOSE GENDER | | Directors | 4 | 6 | 0 | 0 | | PART II: DEMOGRAPHIC BACKGROUND | | | | | | African American or Black | 0 | 0 | 0 | 0 | | Alaskan Native or Native American | 0 | 1 | 0 | 0 | | Asian | 1 | 0 | 0 | 0 | | Hispanic or Latinx | 0 | 1 | 0 | 0 | | Native Hawaiian or Pacific Islander | 0 | 0 | 0 | 0 | | White | 3 | 4 | 0 | 0 | | Two or More Races or Ethnicities | 0 | 0 | 0 | 0 | | LGBTQ+ | 1 | | | | | Did Not Disclose Demographic Background | 0 | | | |
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INFORMATION REGARDING NOMINEES FOR ELECTION The following symbols identify individual experience, qualifications, and skills our Nominating and Corporate Governance Committee considered in making its decision to nominate directors to our Board. The fact that a particular attribute was not considered does not mean that the director lacks such an attribute.
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| | Corporate Strategy | Experience developing and executing long-term strategic plans to encourage innovation and growth. | | Public Company | Past or present board member or executive of another publicly traded company. | | | Financial Industry | Financial services or related industry experience and proven knowledge of key customers and/or associated risks. | | Leadership | Past or present Chief Executive Officer, Chief Financial Officer, Chief Human Resources Officer, Chief Operating Officer, or similar executive experience. | | | Financial Acumen | Experience or expertise in financial accounting and reporting or the financial management of a major organization. | | Operations Management | Experience or expertise in managing the operations of a business or major organization. | | | Highly Regulated Industry | Experience in a highly regulated industry, such as financial services, gaming, healthcare, pharmaceuticals, etc. | | Technology | Understanding of information technology systems and development and/or information security, whether through academia or experience. | | | Risk Management | Experience assessing and mitigating significant competitive, regulatory, legal, or technological risks across an enterprise. | | Corporate Finance | Experience in corporate lending or borrowing, capital markets transactions, significant mergers or acquisitions, private equity, or investment banking. |
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The principal occupation and other business experience, during at least the last five years, of each director nominee is set forth below.
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| Sherilyn G. Anderson Age: 64 Director since: 2020 Committees: • Audit (Chair) • Compensation • Executive • F3P | Sherilyn G. Anderson is Vice Chair of the Board and served as CFO of Betacom Incorporated until August 2022. Betacom delivers dynamic, turnkey solutions to help mobile network operators plan, design, build, upgrade, and manage their networks. Prior to joining Betacom in February 2021, Ms. Anderson was the CFO of glassybaby, a Seattle-based producer and nationwide retailer of hand-blown glassware, and a pioneer in social venture enterprise, from October 2017 to June 2020. During her 20-year investment banking career, Ms. Anderson led over $6 billion of capital market transactions and over $1 billion of bank credit transactions on behalf of governmental entities. Director Qualifications: Ms. Anderson served as Director at Wells Fargo Securities from May 2012 to August 2017 and as Vice President and Director in public finance at UBS, successfully creating and growing both companies’ public finance investment banking practices on the West Coast. She brings substantial experience in financing transactions to the Board. She serves on the Board and is a member of the Finance Committee, of the Pacific Science Center, a nonprofit science museum in Seattle, and as Treasurer of the Vice President of Membership of the Washington chapter of the International Women’s Forum. Ms. Anderson holds an MBA from Harvard Business School, and a B.S. in industrial engineering from Stanford University. | | Key Skills and Experience: | |
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| | Corporate Strategy | | Financial Acumen | | Risk Management | | Leadership | | Technology | | | Financial Industry | | Highly Regulated Industry | | Public Company | | Operations Management | | Corporate Finance |
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| Dana D. Behar Age: 62 Director since: 2015 Committees: • Audit • Loan and Asset Quality (First Fed, Chair) | Dana D. Behar has been the owner of Discovery Bay Investments, LLC, a private equity investment firm based in Seattle, Washington, and focused on agricultural land and real estate, since 2015. Prior to that, Mr. Behar worked at HAL Real Estate Investments Inc., a private equity real estate investment entity based in Seattle, Washington, for 23 years, serving as President and Chief Executive Officer from 2005 until 2015. Director Qualifications: Mr. Behar previously worked in brand management at Procter & Gamble, served as Director of Marketing for the retail chain Egghead Software, and was a management consultant with the Wharton Small Business Development Center. He brings a strong background in business management to the Board. He is active in his community in Seattle, having served as a board member of Community Roots Housing and the Forterra Strong Communities Fund, and is currently serving as a trustee of the Samis Foundation. Mr. Behar has a Bachelor of Arts degree in business with a concentration in finance from the University of Washington and a Master of Business Administration degree with a concentration in finance from the Wharton School of the University of Pennsylvania. | | Key Skills and Experience: | |
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| Sean P. Brennan Age: 62 Director since: 2024 Committees: • Audit • Compensation • Loan and Asset Quality (First Fed) | Sean P. Brennan has worked in commercial banking for more than 35 years, including co-founding Puget Sound Bank in 2004, where he served as executive vice president and chief lending officer from inception until the merger of that bank with Heritage Bank in January 2018. Mr. Brennan served as a corporate banking development consultant for Heritage Bank NW and as a member of the Leadership Committee for the Heritage Bank Community Development Entity from January 2021until December 31, 2023. Prior to transitioning to his consultancy roles, Mr. Brennan served as senior vice president, regional commercial banking director for Heritage Bank from January 2018 through December 2020. Prior to co-founding Puget Sound Bank, Mr. Brennan served as vice president at Washington Trust Bank where, as a member of the initial leadership team, he opened and grew the Seattle corporate banking office from 2000 until 2005, and as vice president for the Seattle corporate banking team of U.S. Bank from 1987 until 2000. Director Qualifications: In addition to his commercial banking experience, Mr. Brennan has provided leadership to public, private, and non-profit organizations. He joined the board of Uwajimaya, Inc., in January 2022 where he chairs the Real Estate Task Force Committee and is a member of the Compensation Committee. Mr. Brennan also serves on the Board of Trustees for Plymouth Housing Group and is a member of the Finance Committee and the Investment Committee. Mr. Brennan has served as a board director for Aboda, Inc., a privately held corporate housing provider, Downtown Emergency Service Center, St. Joseph School Endowment, and on advisory boards for Seattle University’s Steven Sundborg, S.J. Center for Community Engagement and Seattle University’s Planned Giving Committee. | | Key Skills and Experience: | |
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| Craig A. Curtis Age: 63 Director since: 2014 Committees: • Loan and Asset Quality (First Fed) • Executive • Nominating and Corporate Governance (Chair) | Craig A. Curtis is a Partner and Director of Emerging Building Technologies with Mithun, a multi-disciplinary design firm with offices in Seattle, San Francisco and Los Angeles. Mr. Curtis oversees the firm’s commitment to forward-looking industry evolution including mass timber, pre-fabrication and offsite construction. Prior to joining Mithun in 2020, Mr. Curtis served as Chief Architect with Katerra, Inc., starting in January 2016, where he was responsible for the development of Katerra’s building platforms and led the launch of the company’s mass timber design division, including North America’s largest cross-laminated timber factory. Prior to joining Katerra, Mr. Curtis was employed by The Miller Hull Partnership, an architecture and planning firm, for 30 years and served as a partner from 1994 until 2016. Director Qualifications: Mr. Curtis serves as the Chairperson of the First Fed Loan and Asset Quality Committee. In light of First Fed’s significant participation in construction lending, the Board benefits from his broad experience in the construction industry. He has degrees in Architecture and Construction Management from Washington State University and has served on committees for the North Kitsap School District and Suquamish Community Advisory Council. | | Key Skills and Experience: | |
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| Matthew P. Deines Age: 50 Director since: 2019 Committees: • Loan and Asset Quality (First Fed) | Matthew P. Deines became President and Chief Executive Officer (“CEO”) of First Fed in August 2019, and was elected President, CEO, and Director of First Northwest on December 5, 2019. Director Qualifications: With over 20 years in the banking industry, Mr. Deines has experience in a variety of areas, including strategic planning and acquisitions, investor relations, financial reporting, and fintech, as well as operations, information technology, payments, internal controls and board governance. Mr. Deines serves as a Director for the Washington Bankers Association (“WBA”) and has been a conference speaker and instructor for the WBA. He is actively involved with several non-profits. He held these roles at Sound Community Bank (“SBC”) and Sound Financial Bancorp, Inc. (“SFBC”) until March 2018. In 2000, he received his Washington Certified Public Accountant certificate, currently inactive, while working for O’Rourke, Sacher & Moulton, LLP. Mr. Deines served as Executive Vice President and Chief Financial Officer (“CFO”) of Liberty Bay Bank from November 2018 until May 2019. Prior to that, he began work at SBC as its CFO in February 2002 and was promoted to Executive Vice President in January 2005. In 2008, Mr. Deines also became Executive Vice President, CFO, and Corporate Secretary of SFBC. He is a member of the Port Angeles Waterfront Center Board of Directors and actively involved with several other non-profit organizations. | | Key Skills and Experience: | |
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| | Corporate Strategy | | Financial Acumen | | Risk Management | | Leadership | | Technology | | | Financial Industry | | Highly Regulated Industry | | Public Company | | Operations Management | | Corporate Finance |
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| Cindy H. Finnie Age: 73 Director since: 2012 Committees: • Audit • Executive • Compensation • F3P • Nominating and Corporate Governance | Cindy H. Finnie has served as Chair of the Board since 2022. She is the co-owner and President of Rainshadow Properties, Inc., an award-winning boutique hotel and property management company that she co-founded in 1995. Director Qualifications: Ms. Finnie retired in 2011 from Allstate Insurance Company after 38 years of leadership experience. Her range of responsibilities included property and casualty underwriting, sales leadership, business development, and financial management. She was recognized in the company as an expert in developing insurance agencies and was the second person in company history to achieve the top sales leadership award. Her experience in risk management and working in a regulated industry is of great value to the Board. She currently serves as Vice President of the Fort Worden Foundation, Director of the First Fed Foundation, and a member of the Port Townsend Lodging Tax Advisory Council. Past non-profit leadership positions include Board Chair of Centrum, an arts and education organization, Director of the Jefferson County Community Foundation, and Chair of the Fort Worden Public Development Authority. Ms. Finnie was also appointed by the Washington State Governor to serve on the Washington State Arts Commission, which she chaired for three years. Ms. Finnie has a Bachelor of Arts degree from the University of Colorado. | | Key Skills and Experience: | |
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| Gabriel S. Galanda Age: 48 Director since: 2021 Committee: • F3P | Gabriel S. Galanda is an Indigenous rights attorney and the managing lawyer at Galanda Broadman, PLLC. His practice focuses on complex, multi-party litigation and crisis management, representing Indigenous nations, businesses and citizens. He has been named to Best Lawyers in America in the fields of Native American Law and Gaming Law from 2007 to 2024 and dubbed a Super Lawyer by his peers from 2013 to 2024. Director Qualifications: Mr. Galanda is an experienced litigator and transactional attorney. He founded and now operates Huy, a 501(c)(3) non-profit organization dedicated to enhancing religious, cultural and other rehabilitative opportunities for American Indian prisoners. Serving as Chairman of the Huy Board of Advisors, Mr. Galanda leads the organization’s amicus curiae efforts before the U.S. Supreme Court and federal and state appellate courts across the country. He brings experience in legal issues and empathy and inclusion to the Board. Mr. Galanda holds a Bachelor’s Degree from Western Washington University and a Juris Doctorate with a Tribal Law and Policy Certificate from the University of Arizona. | | Key Skills and Experience: | |
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| Lynn A. Terwoerds Age: 60 Director since: 2023 Committees: • Audit • F3P | Lynn A. Terwoerds is a technology thought leader and strategy consultant for global companies. She has been Chief Executive Officer of Digital Resilience, LLC, a cybersecurity consulting firm that she founded, since 2018. Before transitioning to consulting, she served as Executive Director of the Executive Women’s Forum on Information Security, Risk Management and Privacy from February 2016 through December 2020. Prior to February 2016, Ms. Terwoerds was in the Cybersecurity Risk Management division at Oracle Health Services Global Business Unit and prior to that Head of Global Security Architecture and Standards for Barclays PLC. Director Qualifications: Ms. Terwoerds has 24 years of cybersecurity expertise, including hands-on experience running global security incident response and critical infrastructure long-term security strategy. Her background also includes leadership positions in multiple vertical markets ranging from technology to banking and healthcare. Combining a post graduate degree in Classics, a passion for technology and a multi-cultural upbringing, Ms. Terwoerds is uniquely positioned to assist the Board in connecting the dots between people, process, and technology transformation globally. In addition to her consulting work, she also serves as board President of the Northwest Maritime Center and on the advisory board of the Executive Women’s Forum. Ms. Terwoerds is also a member of the National Association of Corporate Directors and holds NACD Directorship Certification. | | Key Skills and Experience: | |
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| Norman J. Tonina, Jr. Age: 59 Director since: 2013 Committees: • Compensation • F3P (Chair) • Nominating and Corporate Governance | Norman J. Tonina, Jr. currently serves as President of the First Fed Foundation and as an adjunct faculty member in Seattle Pacific University’s graduate program in Industrial and Organizational Psychology since 2011, in addition to consulting. He most recently worked at Grameen Foundation, a non-governmental organization focused on enabling the poor to create a world without poverty, where he served as an advisor to the Chief Executive Officer and Board of Directors and as its Chief Human Resources Officer from 2010 to 2016. Director Qualifications: Mr. Tonina began his career at Digital Equipment Corporation in 1987 and joined Microsoft Corporation as a finance manager, rising to become Senior Director of Finance for Microsoft’s Platforms and Applications business. In 1999, he transitioned to Human Resources, where he directed strategic global Human Resources initiatives in the areas of culture, leadership, and talent. The Board benefits from Mr. Tonina’s experience in financial and human capital management. He served on the board of the Fort Worden Public Development Authority from 2011 to 2021. Mr. Tonina earned his Bachelor of Arts degree in Business Administration from Northeastern University, a certificate in Human Resources from the University of Michigan, and a Master’s in Organizational Psychology from Antioch University. | | Key Skills and Experience: | |
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| | Corporate Strategy | | Financial Acumen | | Risk Management | | Leadership | | Technology | | | Financial Industry | | Highly Regulated Industry | | Public Company | | Operations Management | | Corporate Finance |
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| Jennifer Zaccardo Age: 71 Director since: 2011 Committees: • Audit • Compensation (Chair) • Nominating and Corporate Governance | Jennifer Zaccardo is a retired Certified Public Accountant with particular expertise in the timber industry and small business financial reporting and taxation. Prior to her retirement in 2021, she served as President and Tax Partner of Baker, Overby & Moore Inc., P.S., a public accounting firm with which she had been affiliated since 1983. Ms. Zaccardo is a member of the Washington Society of Certified Public Accountants and the American Institute of Certified Public Accountants. Director Qualifications: Ms. Zaccardo brings her expertise in accounting and financial reporting to the Board. She is a past president and treasurer of the Peninsula College Foundation Board of Governors and served on the Quillayute Valley School Board of Directors for 10 years. Ms. Zaccardo earned a Bachelor of Science degree in Forest Resources and a Bachelor of Arts degree in Business Administration from the University of Washington and is a Certified Public Accountant. | | Key Skills and Experience: | |
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BOARD OF DIRECTORS The Boards of Directors of First Northwest and First Fed conduct their business through board and committee meetings. In 2023, the Board held 13 meetings and the Board of Directors of the Bank held 16 meetings. No director of First Northwest or the Bank attended fewer than 90 percent of the total meetings of the boards and committees on which that person served. COMMITTEES AND COMMITTEE CHARTERS The Board has standing Audit, Compensation, First Fed Fintech Partners (“F3P”), Nominating and Corporate Governance, and Executive Committees. The Board has adopted written charters for the Audit, Compensation, F3P, and Nominating and Corporate Governance Committees, copies of which are available under the “Investor Relations” tab on our website at www.ourfirstfed.com. All members of the Audit, Compensation, and Nominating and Corporate Governance Committees are independent, in accordance with the requirements for companies listed on NASDAQ. The Audit Committee consists of Directors Anderson (Chair), Behar, Finnie, Terwoerds, and Zaccardo. The Board has determined that Ms. Anderson and two other members of the Committee meet the definition of “Audit Committee Financial Expert,” as defined by the SEC. This Committee is primarily responsible for overseeing the integrity of First Northwest’s financial reporting processes, financial statement audits, and systems of internal controls regarding finance, accounting, and legal compliance; overseeing the independence and performance of First Northwest’s independent auditors and internal audit function; and providing an avenue of communication among the independent auditor, management, and the Board. The Audit Committee meets quarterly and on an as-needed basis. The Audit Committee met eight times during 2023. The Compensation Committee consists of Directors Anderson, Finnie, Tonina, and Zaccardo (Chair). This Committee meets semiannually and as needed, providing general oversight regarding the personnel, compensation, and benefits matters of First Northwest. In furtherance of this purpose, the Compensation Committee is responsible for setting the compensation of our Chief Executive Officer and reviewing his performance, approving the compensation arrangements and performance goals for other senior executives, and recommending board member compensation. The Compensation Committee met three times during 2023. The F3P Committee consists of Directors Anderson, Finnie, Galanda, Terwoerds, and Tonina (Chair). This Committee meets quarterly and as needed, providing general oversight and strategic direction regarding the Company’s financial technology activities and risk, including strategy, programmatic review, risk monitoring, and control implementation. The F3P Committee met eight times during 2023. The Nominating and Corporate Governance Committee consists of Directors Curtis (Chair), Finnie, Tonina, and Zaccardo. This Committee is responsible for assessing board and committee membership composition, succession planning, and implementing policies and processes regarding corporate governance matters – including oversight of First Northwest’s Environmental, Social, and Governance programming. The Committee also ensures that the requisite expertise, diversity of skills, experience, background, gender and ethnicity, and independence of the Board are considered in evaluating board composition and director nominations. The Nominating and Corporate Governance Committee meets semiannually and on an as-needed basis. This Committee met four times during 2023. The Executive Committee consists of Directors Anderson, Finnie, and Curtis. This Committee acts for the Board of Directors when formal board action is required between regular meetings. The Executive Committee did not meet during 2023. LEADERSHIP STRUCTURE First Northwest has separated the positions of Board Chair and Chief Executive Officer. The Chair, an independent director, leads the Board and presides at all board meetings, while the President and Chief Executive Officer runs the day-to-day business of First Northwest. The Board supports having an independent director in a board leadership position. This enables non-management directors to raise issues and concerns for board consideration without immediately involving management. The Chair also serves as a liaison between the Board and senior management. BOARD INVOLVEMENT IN RISK MANAGEMENT PROCESS As part of its overall responsibility to oversee the management, business, and strategy of First Northwest and First Fed, one of the primary responsibilities of our Board is to oversee the amount and types of risks taken by management in executing our corporate strategy, and to monitor our risk experience against the policies and procedures set to control those risks. The Board’s risk oversight function is carried out through its approval of various policies and procedures, such as our lending and investment policies, and regular monitoring of risk, such as interest rate risk exposure, liquidity, cybersecurity, and problem assets. Some oversight functions are delegated to committees of the Board, with such committees regularly reporting to the full Board the results of their oversight activities. For example, the Audit Committee is responsible for oversight of the independent auditor and meets directly with the auditors at various times during the year, while also receiving quarterly reports on technology and information security, including cybersecurity. Also, the F3P Committee oversees the risks associated with our financial technology activities, including our fintech strategy and investments. BOARD RECRUITMENT Our Board of Directors, through our Nominating and Corporate Governance Committee, remains focused on ensuring (1) a smooth transition when directors decide to retire or otherwise leave our Board and (2) that our Board is systematically refreshed so that, taken as a whole, it has the desired mix of skills, experience, continuity, reputation and diversity relevant to our strategic direction and operating environment, as well as the knowledge, ability and independence to continue to deliver the high standard of governance and oversight expected by investors. Among other aspects of the process, our Board of Directors considers the following criteria in recommending new nominees or the re-election of directors to First Northwest’s Board and its committees:
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| • | expertise and perspective needed to govern our business and strengthen and support senior management, including, for example, diverse financial expertise, knowledge of the financial services industry, corporate leadership, and professional experience in areas relevant to First Northwest’s activities; |
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| • | sound business judgment and a sufficiently broad perspective to make meaningful contributions; |
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| • | time and energy to meet Board commitments; |
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| • | connection to and understanding of the communities we serve; |
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| • | ability to support of management, but remain independent, objective, and willing to question and challenge both openly and in private; and |
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| • | results of our Board and committee self-evaluations, as well as feedback received from the annual interviews of each director by our independent Chair of the Board. |
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One of the nominees for election as a director at the Annual Meeting is Sean Brennan, who was elected to the Board effective March 26, 2024. In early 2024, following a vetting process, the Nominating and Corporate Governance Committee recommended that the number of positions on the Board be increased to ten members and that Mr. Brennan be elected to fill the resulting vacancy. The Nominating and Corporate Governance Committee also considers the periodic rotation of committee members and committee chairs to introduce fresh perspectives to the fulfillment of each committees’ duties. CORPORATE GOVERNANCE POLICY The Board has adopted a Corporate Governance Policy, a copy of which is available under the “Investor Relations” tab on our website at www.ourfirstfed.com. The Policy covers the following matters:
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| • | the role of the Board; |
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| • | the composition of the Board; |
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| • | responsibilities and operation of the Board; |
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| • | the establishment and operation of board committees, including Audit, Nominating and Corporate Governance, F3P, and Compensation Committees; |
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| • | succession planning annual review for the Board, Chief Executive Officer and other executive officers; |
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| • | convening executive sessions of independent directors; |
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| • | the Board’s interaction with management and third parties; |
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| • | evaluation of the performance of the Board and the Chief Executive Officer; |
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| • | communications with shareholders and annual meeting attendance; and |
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| • | director orientation and continuing education. |
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DIRECTOR INDEPENDENCE Our common stock is listed on the NASDAQ Global Market. In accordance with NASDAQ requirements, at least a majority of our directors must be independent directors. The Board has determined that nine of our ten nominated directors are independent, as defined by NASDAQ rule. Only Matthew Deines, our President and Chief Executive Officer, is not independent. CODE OF ETHICS The Code of Ethics applies to each of our directors, officers, and employees, and requires these individuals to maintain the highest standards of professional conduct. The Code is reviewed and updated periodically. The Board reviewed and reapproved the Code in February 2024. A copy of the Code of Ethics is available under the “Investor Relations” tab on our website at www.ourfirstfed.com. DIRECTOR CONTINUING EDUCATION Continuing education programs assist directors in maintaining skills and knowledge necessary or appropriate for the performance of their responsibilities. These programs may include internally developed materials and presentations, programs presented by third parties, and financial and administrative support to attend qualifying academic or other independent programs. Our Board maintains a strong commitment to continuing education activities each year. BOARD EVALUATION The Nominating and Corporate Governance Committee conducts an annual evaluation of the performance of the Board, the Board Chair, and each of its members, including director self-assessments and one-on-one meetings between each director and the Board Chair. The results are reported to the Board. The report includes an assessment of the Board’s compliance with its Corporate Governance Policy, and identification of areas in which the Board could improve its performance. SHAREHOLDER COMMUNICATION WITH THE BOARD OF DIRECTORS The Board welcomes communication from shareholders. Shareholders may send communications to the Board of Directors, First Northwest Bancorp, 105 W. Eighth Street, Port Angeles, Washington 98362. Shareholders should clearly indicate the director or directors for whom the communication is intended so that each communication may be forwarded appropriately. ANNUAL MEETING ATTENDANCE BY DIRECTORS We encourage, but do not require, our directors to attend the Annual Meeting of Shareholders. Nine of our ten directors then in office attended the 2023 Annual Meeting of Shareholders held on May 23, 2023. TRANSACTIONS WITH RELATED PERSONS First Fed has followed a policy of granting loans to executive officers and directors that fully complies with all applicable federal regulations. Loans to directors and executive officers are made in the ordinary course of business and on the same terms and conditions, including interest rates and collateral, as those of comparable transactions with persons not related to First Fed prevailing at the time, in accordance with our underwriting guidelines, and do not involve more than the normal risk of collectability or present other unfavorable features. All loans to directors and executive officers and their related persons on December 31, 2023, were performing in accordance with their terms. STOCK OWNERSHIP GUIDELINES In May 2017, the Board adopted a stock ownership policy because it believes that it is in First Northwest’s best interest to align the financial interests of our non-employee directors and Chief Executive Officer with those of our shareholders. The policy requires non-employee directors to own shares of First Northwest’s common stock equal in value to three times the respective director’s annual cash retainer. Each non-employee director who was in office at the beginning of 2023 was compliant with this policy requirement throughout 2023. In addition, our stock ownership guidelines require our Chief Executive Officer to hold First Northwest shares valued at three times his annual base salary within three years of his date of hire. Mr. Deines met his stock ownership guideline in 2020, approximately one year after his appointment as Chief Executive Officer of First Northwest. ANTI-HEDGING AND ANTI-PLEDGING POLICY Under our Anti-Hedging and Anti-Pledging Policy, we prohibit hedging the economic risk of ownership of our common stock through short sales or the purchase or sale of options, puts, calls, straddles, equity swaps, or other derivative securities that are directly linked to First Northwest stock, by our directors and officers. We also prohibit our directors and officers from holding our stock in a margin account or pledging our stock as collateral for a loan. DIRECTOR COMPENSATION The following table shows the compensation paid to our directors for the year ended December 31, 2023, except for Mr. Deines, our President and Chief Executive Officer, whose compensation is presented in the Summary Compensation Table in the section entitled “Executive Compensation” below. Mr. Brennan is not listed in the table because he joined the Board in 2024.
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| NAME | FEES EARNED OR PAID IN CASH ($) | STOCK AWARDS(1) ($) | ALL OTHER COMPENSATION(2) ($) | TOTAL ($) | | Sherilyn G. Anderson | 50,570 | 22,588 | 938 | 74,096 | | Dana D. Behar | 45,191 | 22,588 | 248 | 68,027 | | Craig A. Curtis | 44,856 | 22,588 | 248 | 67,692 | | Cindy H. Finnie | 63,490 | 22,588 | 248 | 86,326 | | Gabriel S. Galanda | 39,130 | 22,588 | 643 | 62,361 | | Stephen E. Oliver(3) | 20,750 | 22,588 | 248 | 43,586 | | Lynn A. Terwoerds | 40,460 | 67,401 | 0 | 107,861 | | Norman J. Tonina, Jr. | 49,262 | 22,588 | 248 | 72,098 | | Jennifer Zaccardo | 49,494 | 22,588 | 248 | 72,330 |
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| YEAR | SUMMARY COMPENSATION TABLE TOTAL FOR PEO ($) | COMPENSATION ACTUALLY PAID TO PEO(4) ($) | AVERAGE SUMMARY COMPENSATION TABLE TOTAL FOR NON-PEO NEOS ($) | AVERAGE COMPENSATION ACTUALLY PAID TO NON-PEO NEOS(4) ($) | VALUE OF INITIAL FIXED $100 INVESTMENT BASED ON TOTAL SHAREHOLDER RETURN ($) | NET INCOME (IN THOUSANDS) ($) | | 2023(1) | 598,644 | 619,516 | 388,507 | 395,699 | 107.62 | 2,286 | | 2022(2) | 720,977 | 650,221 | 441,497 | 451,898 | 101.45 | 13,496 | | 2021(3) | 787,400 | 1,063,295 | 441,745 | 616,244 | 131.32 | 14,979 |
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| (4) The amounts shown for Compensation Actually Paid have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually earned, realized, or received by the Company’s NEOs. These amounts reflect the Summary Compensation Table Total with certain adjustments as described in the tables below. |
Directors
Directors A. Number. The Corporation shall be under the direction of a Board of Directors. The number of directors shall be as provided in the Corporation’s Bylaws, but in no event shall be fewer than five nor more than 15. B. Election and Term. At each annual meeting of shareholders, the shareholders shall elect the directors to hold office until the next annual meeting of shareholders and until their respective successors are elected and qualified. C. Vacancies. Any vacancy occurring in the Board of Directors may be filled only by the affirmative vote of a majority of the remaining directors, whether or not there remains a quorum of the Board of Directors. A director elected to fill a vacancy shall be elected for a term which expires at the next shareholders’ meeting at which directors are elected. A directorship to be filled by reason of an increase in the number of directors may be filled by election by the Board of Directors for a term continuing only until the next election of directors by the shareholders.