Banking – Page 381 – NewzIntel.com

MIL-OSI Banking: Pan Gongsheng: Strike the right balance and pursue high-quality development of the Chinese economy

Source: Bank for International Settlements

Distinguished Party Secretary Yin Li, Mayor Yin Yong, Mr. Wang Jiang, Mr. Li Yunze, Mr. Wu Qing, Mr. Fu Hua, Mr. Zhu Hexin, and dear guests,

Good morning!

It is a great pleasure to attend the Financial Street Forum. I would like to take this opportunity to exchange views with you on three issues.

I. Progress in implementing a package of incremental monetary policies

According to arrangements of the CPC Central Committee, financial regulators announced a package of policies to support stable economic growth on September 24. The move attracted great attention and received extensive support. The day before yesterday, the PBOC, the National Financial Regulatory Administration (NFRA), and China Securities Regulatory Commission (CSRC) organized a meeting with major commercial banks, securities firms, and fund companies to make arrangements for prompt implementation of the package of policies. Here I would like to share with you our progress in implementing relevant policies.

In terms of the required reserve ratio (RRR) and interest rate cut, on September 27, the RRR was cut by 0.5 percentage points, the 7-day reverse repo rate was cut by 0.2 percentage points, and the medium-term lending facility (MLF) rate was cut by 0.3 percentage points from 2.3 percent to 2 percent. We might further cut the RRR by 0.25-0.5 percentage points at proper time, depending on the market liquidity before the year-end. This morning, the commercial banks have announced to lower the deposit rates, and the loan prime rate (LPR) to be released on October 21 is also expected to drop by 0.2-0.25 percentage points. The four policies related to real estate finance have all been rolled out. Specifically, the adjustment of rates on existing housing loans is a policy to benefit people’s livelihood unveiled at the decision of the CPC Central Committee. It will benefit 50 million households, whose interest expenses will be reduced by about RMB150 billion each year. As for the two financial instruments to support stable development of the capital market, the PBOC has established a special working group together with the CSRC and NFRA. Securities, funds and insurance companies swap facility (SFISF) are now open to financial institutions for application. The policies related to special central bank lending for shares buyback and holdings increase have been officially released today for implementation.

Since it was announced and implemented, the policy package has received positive feedback both at home and abroad. It has vigorously boosted social confidence and played an effective role in promoting stable economic and financial performance. We have taken three main factors into consideration while formulating these policies.

First, given the current economic performance, we need to implement strong macro aggregate policies. Major problems in the current economic operation, as reflected at the macro level, are insufficient effective demand, weak social expectations and low prices. A common market view is that we need to launch strong macro policies. According to the arrangements of the CPC Central Committee, the PBOC has conducted in-depth researches and prepared policy plans in advance. Against this backdrop, the CPC Central Committee promptly made the decision to launch a package of incremental policies, which reflect its determination to secure the economy, stabilize expectations, boost consumption and benefit people’s livelihood. The market responded to the initiative positively.

Second, the economy still faces some prominent challenges, which are mainly related to the real estate market and the capital market. Drawing on international experience and China’s practices in the past, we need to unveil targeted policies in response.

In terms of the real estate market, the PBOC, based on its mandate, has improved four real estate finance-related policies, supporting risk defusing and sound development of the real estate market from a macro-prudential perspective.

In terms of the capital market, the PBOC, together with the CSRC, has developed two instruments to facilitate the stable development of the capital market. The two instruments were designed completely based on market principles, and internationally there had been successful practices. Regarding the SFISF, the central bank does not provide fund support for the market directly, so it does not expand the central bank’s money supply and base money. The central bank lending for shares buyback and holdings increase is targeted. The credit funds must not enter the stock market in violation of financial regulation. This remains a red line. The two instruments showcase the efforts of the PBOC to expand and explore its mandate of maintaining financial stability. We will keep on cooperating with the CSRC to gradually improve the instruments in practice, and explore day-to-day institutional arrangements.

Third, the central bank needs to observe and evaluate financial market risks, and adopt proper measures to cut off or moderate the accumulation of financial market risks from the perspective of macro-prudential management. Recently, the PBOC strengthened communications with the market on the long-term government bond yield. We aimed to contain the potential systemic risk derived from one-sided downward movement of long-term government bond yield driven by herd effect. The financial markets are highly sensitive, which means they rapidly react to and price in changes in policies and various factors. From a macro and in-depth point of view, the real economy and the capital market are interwoven and interactive. The valuation recovery helps the capital market to perform its functions of investment and financing. It breaks the vicious cycle of market slump and equity pledge risks, thus promoting the healthy development of listed companies, improving social expectations, and invigorating consumption and investment demand.

II. The right balance and high-quality development of the Chinese economy

The objective of macroeconomic adjustments is to calibrate the economic development trajectory in the short term, while that of reforms and economic restructuring focuses on the mid- to long-term, which is to achieve high-quality development and sustainable economic growth.

Since the 18th National Congress of the CPC, General Secretary Xi Jinping and the CPC Central Committee have been highlighting the importance of improving the quality and benefits of economic growth. The 19th National Congress of the CPC made it clear that the Chinese economy had been transitioning from a phase of rapid growth to a stage of high-quality development. A requisite for China to adapt to the evolution of the principal contradiction facing the Chinese society, high-quality development focuses on addressing the problem of unbalanced and inadequate development, so as to better harmonize the major ratios in the national economy.

In physics, balance means that an object remains relatively stable under the combined action of several forces. The right balance in economic development refers to a dynamic process of the interaction and improvement of various economic structures and ratios, and it is a common phenomenon in the economic development of various countries.

Since the beginning of this century, the global economy has gone through three major balancing periods in which China were deeply engaged and made active contributions.

The first period was between 2001 and 2007. After China’s accession to the WTO, its low cost factors fully integrated into the global industrial division of labour, which effectively expanded global supply, and enhanced the production efficiency. It helped to tame the global inflation and boost economic growth.

The second period was between 2008 and 2017. After the Global Financial Crisis, the world economy featured “three lows and one high”, namely, low growth rate, low inflation, low interest rate, and high debt level. When the global demand was dampened, China took the initiative to vigorously boost domestic demand. The efforts helped spur the world economy and avoid its deflation. During the decade, China’s contribution to the world economic growth was stable at around 30 percent.

The third period was after the outbreak of the COVID-19. Due to supply shocks and potent demand side stimulus, the global inflation once surged and stayed elevated. While China’s supply chain system remained stable, it helped to fill the global supply gap, presenting China’s sustained contribution to bringing down inflation and achieving economic balance in the world.

The Chinese economy has also undergone profound restructuring and balancing processes. In recent years, with the deepening of supply-side structural reforms, the acceleration in the establishment of a new development paradigm, and the adoption of other strategic measures, China has made continued efforts to shift its economic growth model from the traditional focus on high-speed growth to an innovation-driven, quality- and efficiency-oriented mode. As a result, the quality and efficiency of supply have been improving while the value added of high-tech manufacturing has accounted for an expanding share. With the contribution from consumption continuously on the rise, consumption, investment, and net exports made up 56 percent, 42 percent, and 2 percent of China’s GDP in 2023, respectively, as compared with the corresponding data of 49 percent, 47 percent, and 4 percent in 2010.

To promote high-quality economic development and sustainable growth, we need to strike the right balance in economic operation from the following three perspectives.

First, we need to strike the right balance between the pace and quality of economic growth. Given the vast size of the Chinese economy, we need to keep economic growth at a reasonable rate in order to boost employment and people’s income. As the transformation of the economic development model and economic restructuring will likely affect economic growth in the short term, we need to strike the right balance, put effort into fostering the new drivers of economic growth, and firmly support stable economic growth so as to effectively upgrade and appropriately expand China’s economic output.

Second, we need to strike the right balance between internal and external concerns in achieving economic growth. In recent years, the Chinese economy has seen effective improvements in its external equilibrium. China’s current account surplus-to-GDP ratio, which fell from around 10 percent in 2007 to approximately 2 percent in 2011, has stayed within an internationally accepted range of 1-2 percent in recent years. Currently, as international geopolitical tensions have led to economic deglobalization, international trade politicalization and instrumentalization, the world’s sustainable economic growth and welfare growth are facing obstacles. Upholding free trade and fair competition, we will remain committed to expanding two-way opening-up, and we will make better use of both domestic and international markets as well as their resources to further enhance the international competitiveness of Chinese enterprises and to accelerate the establishment of a new development paradigm.

Third, we need to strike the right balance between investment and consumption. During past economic cycles in the history, we have confronted economic downward pressures mainly by boosting investment and maintaining supply-side productive capacity, which has played a significant and effective role. In pursuing high-quality development, we need to follow the direction of economic restructuring to adjust investments and channel more of them to areas such as sci-tech innovation and basic livelihoods. We will continue to apply a people-centered development philosophy, focus on raising household income, optimize the structure of fiscal expenditures, enhance the social security system, and promote consumption growth, thus giving rise to a virtuous cycle in which “government encourages consumption, consumption activates markets, markets lead businesses, and businesses expand investment”.

To achieve the right balance in the economy, we need to deal with the following priorities. First, macro economic policies should pivot from over-emphasis on investment to both consumption and investment, with more focus on consumption. Second, the relationship between government and market should be handled in a more appropriate manner, which calls for a scientific management and balance of the boundaries between government and market, and an enhanced pertinence as well as targetedness of policies regarding market concerns. Third, reform and opening-up will be further deepened to foster a favorable economic environment based on the rule of law and to create a more equitable and vibrant market environment.

III. The positive role the PBOC plays in serving high-quality development of the economy

The PBOC is both a financial regulator and a supervisory authority of the macro economy. Focused on the primary mandate of serving high-quality development, we will intensify the counter-cyclical adjustments of monetary policies and macro-prudential policies, and enhance the precision and effectiveness of financial support policies, so as to create a sound monetary and financial environment for the stable growth and structural adjustments of the economy. We will steadily advance the financial opening-up at a high level and strike the right balance of the economy.

First, we will further improve the monetary policy framework. I elaborated on the framework in Lujiazui Forum in June. Today, I would like to emphasize the following points. In terms of policy objectives, we will take reasonable prices rise as an important consideration, and give a bigger role to price-based policy tools, such as interest rate. In terms of policy implementation, we will enrich the monetary policy toolbox on an ongoing basis, make good use of structural monetary policy tools, and gradually increase transactions of government bonds in open market operations. The PBOC and the Ministry of Finance (MOF) have established a joint working group, and relevant institutional arrangements will be improved continuously. In terms of policy transmission, we will continue to enhance the transparency of monetary policies, improve the independent pricing capabilities of financial institutions, and heighten consistency with fiscal policies, industrial policies, and regulatory policies, in a bid to achieve a more efficient transmission of monetary policies.

Second, we will provide more adaptive and targeted financial services to support economic restructuring and rebalancing. We will further intensify the macro credit management, continue to promote technology finance, green finance, inclusive finance, old-age finance and digital finance, and step up efforts to provide prime financial services for major national strategies, key areas and weak links. We will continue to build a financial market that is well-regulated, transparent, open, dynamic and resilient, and support developing diversified financing channels.

The high-quality development is inseparable from sci-tech innovation. Modern sci-tech innovation projects are characterized by long investment cycle, huge investment, high risk and uncertainty. They call for diversified financial services. In particular, enterprises in seed stage and start-ups are highly reliant on equity financing. Therefore, active private equity investments (PEs) and venture capitals (VCs) are very important market participants. The PBOC will strengthen communication and cooperation with relevant authorities, improve the financial policies supporting sci-tech innovation, cultivate a financial market ecology that is conducive to sci-tech innovation, so as to continuously enhance the capacity, intensity and quality of financial support for sci-tech innovation.

Third, we will improve the macro-prudential framework and the mechanism for systemic financial risk prevention and resolution. From a macro perspective, we will maintain a right balance between economic growth, economic restructuring and financial risk prevention, improve the system of risk monitoring, early warning and resolution, and enhance the financial stability guarantee system. We will closely watch the economic and financial performance, make timely counter-cyclical adjustments, and preemptively forestall and defuse systemic financial risks.

Fourth, we will build a new and open financial system at a higher level. We will steadily expand the institutional opening-up of financial services and financial markets, expand the connectivity between domestic and overseas financial markets, facilitate trade, investment and financing. In line with the market-driven principle and based on the independent decision-making of market participants, we will make steady and solid progress in advancing RMB internationalization. We will take an active part in global economic and financial governance and cooperation, and promote the balanced and sustainable economic development of China and the world as a whole.

Last but not least, I’d like to wish this forum a complete success! Thank you!

MIL OSI Global Banks –

January 25, 2025

MIL-OSI Banking: Claudia Buch: Bank profitability – a mirror of the past, creating a vision for the future

Source: Bank for International Settlements

The history of banking contains many examples of institutions that reported high profitability before failing. This profitability concealed underlying risks and, over time, proved to be illusory. In the run-up to the global financial crisis, bank profitability was relatively high, but, as the crisis unfolded, these profits declined sharply and turned into losses.

Banking regulation and supervision have significantly improved since then. Regulation has been reformed at the global level, requiring banks to be better capitalised and more liquid, while the Single Supervisory Mechanism, underpinned by the Single Rulebook, has been established.

Bank profitability in Europe has increased in recent years. In some ways, the current levels of bank profitability mirror the past – structurally, by reflecting differences in markets and banks’ business models, and more cyclically, by reflecting the changing macroeconomic environment and higher interest rates. This raises the question as to whether profitability is a good metric for assessing bank resilience or if there are other indicators we should consider.

In a market economy, profitability is a key performance indicator. It is highly correlated with business models, productivity and, in this sense, the contribution that firms make to economic welfare. Banks are no exception here.

At the same time, profitability does not measure firms’ contribution to welfare more broadly. Generally, a high degree of profitability can signal excessive market power. In the financial sector, it can be difficult for outsiders to verify the quality of services provided and the underlying risks. High profitability can therefore also signal excessive risk taking or even fraudulent behaviour. Banks and their shareholders may take on more risk than is socially acceptable if there are potentially great rewards to be had and only limited downsides. Seeking to maximise profits in the short term can be detrimental to the longer-term sustainability of a business model. In addition, the public cares a great deal about banks’ stability and resilience since banking crises can come at a significant cost to the taxpayer.

MIL OSI Global Banks –

January 25, 2025

MIL-OSI Banking: Elizabeth McCaul: Supervisory expectations on cloud outsourcing

Source: Bank for International Settlements

It is my great pleasure to speak today at the KPMG Cloud Conference 2024. It is a pity that I cannot be with you in person, but I am sure that you are having a wonderful conference.

There is no doubt that cloud outsourcing offers opportunities to scale operations efficiently, reduce costs and enhance flexibility by leveraging cloud providers’ advanced infrastructure and services. Indeed, using the cloud can be a viable strategy for banks to reduce the complexity of their IT operations, which would be a welcome development. But it also introduces new risks and new challenges, including preparing IT systems for use in a cloud environment.

In particular, it presents risks related to IT and data security and vendor lock-in which, if not properly managed, could lead to operational vulnerabilities and business disruptions.

I would like to make three main points in my speech today.

First, cloud outsourcing is rapidly transforming the banking sector, with a significant rise in adoption and expenditure. But it also increases banks’ risk exposure, which demands heightened responsibility and robust governance frameworks.

Second, when adopting cloud strategies, banks should retain full accountability for outsourced services, ensuring clear roles, rigorous risk management and appropriate IT security measures.

Third, our supervisory expectations should not be seen as regulatory hurdles, but as strategic enablers to enhance resilience, operational continuity and data protection in banks’ cloud strategies.

Relevance of the cloud

Cloud services are transforming the economic landscape and reshaping traditional business models. According to a report by Gartner, worldwide end-user spending on public cloud services is forecast to grow by 20.4% to total USD 675.4 billion in 2024¹, driven largely by sectors like banking. In our own stocktake, we have found that essentially all significant institutions under our supervision use cloud services. Cloud services account for approximately 15% of all outsourcing contracts, with half of these contracts covering the outsourcing of critical or important functions. Moreover, cloud expenses are among the fastest-rising outsourcing costs. But with this growth comes increased responsibility.

Third-party risk management, including cloud outsourcing, is high on the list of the ECB’s supervisory priorities for 2024-26 and we expect banks to establish robust outsourcing risk arrangements to proactively tackle any risks that might lead to disruption of critical activities or services.

The ECB’s supervisory expectations

We published our draft Guide on cloud outsourcing for public consultation in June this year. The public consultation was open until mid-July and we are now assessing all of the comments.

In total, we received 698 comments from 26 respondents, and there was a strong focus on governance aspects. The main respondents were banking associations, although cloud service providers, individual banks and other industry associations also contributed to the consultation.

Before I tell you more about the comments, let me first explain what the Guide is all about.

The Guide is consistent with existing regulation such as the Digital Operational Resilience Act (DORA) and aims to promote a level playing field for the supervisory treatment of cloud outsourcing by clarifying our supervisory expectations. The Guide draws on risks and best practices observed by Joint Supervisory Teams in the context of ongoing supervision and dedicated on-site inspections.

At the heart of the Guide is the clear expectation for banks to retain full responsibility for their outsourced services. It is not merely a matter of compliance, but accountability. The management body in each institution should ensure that the roles and responsibilities related to cloud outsourcing are clearly defined, well understood and embedded in both internal policies and contractual agreements with cloud service providers (CSPs).

In line with the requirements under DORA, banks should conduct a thorough pre-outsourcing analysis. This involves a detailed risk assessment that considers the complexities of sub-outsourcing chains, data security risks and potential vendor lock-in scenarios. It is important that banks align their cloud strategy with their overall business strategy, ensuring consistency across governance frameworks.

The Capital Requirements Directive states that banks must have contingency and business continuity plans that ensure they are able to continue operating and limit losses in the event of severe disruption to their business. In doing so, banks should adopt a holistic approach to business continuity, particularly for critical functions. Those measures may include multi-region data centres, hybrid cloud architectures, or even multiple CSPs to enhance resilience. This layered approach is crucial in mitigating the risk of service disruption and ensuring that banks can continue to operate smoothly, even in worst-case scenarios such as a failure of the CSP.

We also place significant emphasis on IT security and data confidentiality. This includes implementing stringent data security measures such as encryption and associated cryptographic key management to protect sensitive information. It is vital that these measures are regularly reviewed and updated in response to evolving threats. Additionally, we consider it good practice for banks to maintain a clear policy on data location, ensuring that data storage and processing comply with both regulatory requirements and the institution’s own risk management policies.

Moreover, we advise banks to subject all cloud services to rigorous testing, including disaster recovery plans. In particular, we say that banks should not solely rely on certifications provided by CSPs but also conduct their own independent checks to validate these critical processes. Indeed, I would highlight that the external certifications provided by CSPs may not always be tested as robustly as banks would hope. Banks should be careful not to be too trusting, like the financial sector was before 2008 when it trusted the credit rating agencies. Regular audits and continuous monitoring of CSPs are essential to verify compliance with agreed standards and to promptly identify any emerging risks.

Robust exit strategies are another important element in the area of cloud outsourcing. Comprehensive exit plans ensure seamless transitions and minimise any potential disruptions. These plans should include clear roles and responsibilities, effective data portability solutions and provisions for business continuity. Regular testing of disaster recovery strategies is crucial, ensuring that both the bank and its CSPs are prepared for various scenarios, including abrupt service discontinuation. I encourage all of you to view these guidelines not as mere regulatory hurdles, but as strategic enablers. Robust governance and risk management frameworks are not just about meeting supervisory expectations – they are about safeguarding the integrity of banks and the trust that depositors put in them.

Let me now turn to some of the comments we have received. Many of them concern the legal nature of the Guide and how it relates to existing regulation. Again, let me be very clear here: the Guide does not establish any new regulatory requirements. It simply sets out our supervisory expectations and provides examples of good practices. Some of the other comments relate to more specific issues, such as the need for backups in separate locations, cloud resilience measures and the definition of concentration risks. We very much welcome this detailed feedback and will adjust the Guide as necessary to clarify our expectations. We plan to have the final version ready by the end of the year.

Conclusion

Let me conclude.

Cloud outsourcing can provide significant opportunities for banks but it also increases their risk exposure. This demands robust governance, comprehensive risk assessments and thorough pre-outsourcing analyses. Our supervisory expectations should not be seen as regulatory hurdles in this regard but as strategic enablers to enhance resilience, operational continuity and data protection in banks’ cloud strategies.

I wish you a wonderful rest of the conference today.

MIL OSI Global Banks –

January 25, 2025

MIL-OSI Banking: Elizabeth McCaul: Fading crises, shifting priorities – a supervisory perspective on the regulatory cycle

Source: Bank for International Settlements

Thank you very much for inviting me to today’s conference.

I regret that I am not able to join you in person but I am sure that you are having very productive and insightful discussions.

The title of the conference, “EU banking regulation at a turning point”, indicates that the regulatory environment seems to be undergoing a fundamental shift. While the years following the global financial crisis have been devoted to reinforcing the regulatory framework to prevent a recurrence of similar failures, the public debate seems to have shifted away from focusing on safety and stability towards placing greater emphasis on competitiveness.

Shifts in public opinion on regulation are nothing new. There is a natural ebb and flow of regulatory intensity driven by crises, economic conditions and political priorities. After a crisis, there is often strong public support for stricter regulation, which tends to weaken over time as the crisis recedes.

In today’s remarks, I want to give you a supervisory perspective on the regulatory cycle and its shifting priorities.

I would like to make three main points.

First, it is a fundamental misconception to frame safety and competitiveness as opposing forces. A stable and secure financial system forms the bedrock of long-term competitiveness.

Second, the post-crisis reform agenda in Europe is not yet complete. Notably, the banking union is still unfinished and the capital markets union requires more ambition. For me, there is a clear link here between these important policy objectives and buttressing the competitiveness of the sector.

Third, we need to tackle emerging risks, such as the growth of the non-bank financial intermediation (NBFI) sector, and the rising geopolitical risk, which manifests itself in a number of ways, including in concerns about cyberattacks. Tackling these risks will contribute towards ensuring the continued resilience of the financial system.

Heeding the lessons from the past

As the great financial crisis fades into the rearview mirror, it seems that competitiveness considerations have taken the wheel. However, just as guardrails on a motorway do not impede drivers but ensure they stay on the road, a robust regulatory framework sets safe boundaries for banks, enabling them to fulfil their role of lending to the real economy.

Let me take this traffic metaphor even further. There are countless studies showing that speed limits not only reduce danger but also minimise congestion, thereby reducing the overall travel time. It’s a fallacy to think that higher speed limits mean faster travel, just as laxer regulation does not lead to more sustainable growth. Similarly, regulatory competition between jurisdictions is more likely to lead to a race to the bottom than to a robust regulatory framework.

Research consistently shows that well-capitalised banks are better positioned to support the real economy thanks to their enhanced capacity to absorb losses and maintain stability, even under financial stress. Specifically, impact assessments for the Basel reforms have demonstrated that while there may be short-term economic costs, these are far outweighed by the long-term benefits, most notably increased economic resilience.

As for concerns over competitive advantages or disadvantages, I am not convinced that EU banks are at a disadvantage. In fact, the notion that regulatory requirements are more stringent in the EU than in the United States does not hold up to scrutiny. Evidence shows that global systemically important banks (G-SIBs) in the United States face slightly higher capital requirements than their EU counterparts.

Furthermore, when we account for differences in how banks calculate risk-weighted assets, it becomes clear that average capital requirements for significant institutions in the banking union would be somewhat higher under US rules. This directly challenges some of the industry reports that suggest otherwise.¹

Completing the banking union and the capital markets union

Let me now move to my second point: the need to complete the banking union and the capital markets union.

In recent years, Europe’s banking sector has demonstrated resilience amid unforeseen challenges, including the coronavirus pandemic, the energy supply shock following Russia’s invasion of Ukraine and high inflation.

This resilience is reflected in the numbers: in 2015 the average ratio of non-performing loans (NPLs) for significant banks in the banking union was 7.5%, at a time when some banking systems had ratios close to 50%. At the end of the second quarter of this year, this ratio had decreased to 2.3%, driven mainly by the reduction of NPLs in high-NPL banks.

Similarly, the Common Equity Tier 1 ratio for significant banks has risen from 12.7% in 2015 to 15.8% today. Bank profitability has increased considerably in recent quarters, benefiting from higher interest rates, and return on equity now stands at 10.1%.

This resilience is also a result of the strengthened supervisory and regulatory framework after the global financial crisis, including the creation of European banking supervision. The limited repercussions from the March 2023 banking sector turmoil stand as a testament to the robustness of our banking union.

However, while we have made significant strides to build a more resilient banking union, the journey is far from complete. Without a European deposit insurance scheme, there cannot be a truly single banking system. Depositors across the banking union should have a uniform level of confidence that their deposits are safeguarded during crises, irrespective of their Member State or the location of their bank.

We must also enhance the crisis management and deposit insurance (CMDI) framework to effectively manage the failures of small and medium-sized banks. It is crucial that authorities have the flexibility to act and that adequate funding is available for a diverse range of scenarios.

Losses from bank failures should primarily be borne by the bank’s shareholders and creditors. Nonetheless, the framework should also allow for the use of industry-funded safety nets when necessary to protect financial stability.

In particular, deposit guarantee schemes should be equipped to support the use of crisis management tools, for example by contributing to meeting the bail-in conditions for gaining access to the Single Resolution Fund. Smaller banks, which often rely heavily on deposits as a funding source, may face challenges in issuing financial instruments that could be bailed in if the bank fails.

This issue can be mitigated by clarifying and broadening the least cost test and introducing a general depositor preference based on an equal ranking of all deposits.

The current review of the CMDI framework is an opportunity to bring durable fixes to the flaws I have just described. We hope the co-legislators will reach an ambitious agreement and not settle for small-scale tweaks that would largely preserve the current – and less than satisfactory – status quo.

Liquidity in resolution is another important aspect of crisis management where progress is needed. A resolved bank should primarily rely on market funding for liquidity, but a public liquidity backstop can be critical to maintain confidence in the resolution process, as demonstrated by recent crises in other jurisdictions.

Unlike other jurisdictions, however, the banking union lacks an effective public sector backstop mechanism to provide this temporary liquidity funding. We therefore encourage all EU stakeholders to resume discussions on setting up a European-level public backstop to ensure liquidity is provided to banks facing resolution in a timely and effective manner.

The incompleteness of the banking union is a significant impediment to creating a truly integrated banking sector in Europe and optimising its competitiveness. Achieving this goal means removing unnecessary barriers to cross-border banking and enabling cross-border groups to manage liquidity and capital at the group level. A fully integrated, cross-border European banking landscape would not only make banks more efficient but also more resilient to domestic shocks, by enabling them to diversify their risks and revenue streams. This would contribute to private risk sharing and enhance the overall economy’s robustness and efficiency, benefiting European citizens.

Let me now turn to the second element of what is missing in Europe’s financial architecture: the capital markets union.

The capital markets union and the banking union are complementary projects. Progress on the capital markets union provides opportunities for banks and vice versa. And deepening the capital markets union is vital for the European economy to attract the necessary private investments to support innovation and the digital and green transitions, thus bolstering EU competitiveness.

For banks, this means more cross-border activities, which would make them more competitive compared with their international counterparts. In a more integrated pan-European capital market, banks could fully exploit economies of scale by offering similar products and services across multiple countries.

Targeted harmonisations across Member States could facilitate such cross-border lending, enabling banks to better assess risks and opportunities from borrowers in other Member States. Completing the banking union would significantly accelerate the push towards a truly integrated European banking landscape.

Securitisation is another measure to advance the capital markets union where banks play a key role. Given the constraints on banks’ balance sheets, capital markets can complement bank lending and increase the financing available to the private sector while transferring risks to other intermediaries. Securitisation is crucial as it provides a diversified funding base for banks, a tool to transfer credit risks and new assets for investors. This can also create space for additional lending to the economy.

Tackling emerging risks – non-bank financial institutions and rising geopolitical risks

While non-banks may help in financing the significant needs of the twin green and digital transition, they also necessitate adequate regulation and close monitoring.

The growth in the NBFI sector is staggering. In the euro area the sector has more than doubled in size, from €15 trillion in 2008 to €32 trillion in 2024. Globally, the numbers are even more worrying, with the sector growing from €87 trillion in 2008 to €200 trillion in 2022.

The private credit market is a particular concern. It accounts for €1.6 trillion of the global market and has also seen significant growth recently. The European private credit market growth is accelerating by 29% in the last three years, but the market is still much smaller than the market in the United States, which is where investors and asset managers are often based. The end investors are pension funds, sovereign wealth funds and insurance firms, but banks play a significant role in leveraging and providing bridge loans at various levels to credit funds. We recently completed a deep dive on the topic and found that banks are not able to fully identify the myriad ways they have exposure to private credit funds. Therefore, concentration risk could be significant.

We know that risk from the NBFI sector can materialise through various channels. One such channel is the correlation of exposures, especially given the growth in private credit and equity markets. We supervisors do not have a full picture of the level of exposure and correlations between NBFI balance sheets and bank lending arrangements, lines of credit or derivatives to and from NBFIs.

To make the market less opaque, we should further harmonise, enhance and expand reporting requirements and make information-sharing between authorities easier at the global level.

The growth in the NBFI market is not the only concern we have about the current risk environment. There is ample evidence in our constant media feeds of rising risks. We need only switch on our news channels to see frightening images of human tragedy, Russia’s invasion of Ukraine, the widening conflagration in the Middle East, and even what may be the most significant military exercise yet conducted by Chinese armed forces encircling Taiwan. There are many reasons to be concerned about rising geopolitical risk, such as supply chain disruptions, energy disruptions and inflationary pressures. They all pose threats to resilience. I’d like to highlight one resulting risk – the increased risk of cyberattacks, in particular the increased threat from nation state actors. Our IT risk questionnaire shows a significant uptick year after year. In 2022, 50% of our supervised entities were subject to at least one successful cyber attack, rising to 68% percent in 2023 as the upcoming publication of our annual horizontal analysis will show. On an absolute basis the number of reports has also risen significantly. The number of cyber incident reports that we have received in 2023 was 77% higher than in 2022, and we expect the total number of incident reports in 2024 to be similar to 2023. The IMF also reports that the number of attacks has doubled since the pandemic.

Conclusion

Let me conclude.

While the public debate on banking regulation may have shifted, we need to continue to uphold robust regulatory frameworks that balance safety with competitiveness. Completing the banking union and the capital markets union remains a critical priority and one that can enhance the overall competitiveness of the sector. In addition, we must remain vigilant in addressing the emerging risks posed by the growing NBFI sector and rising geopolitical risks that threaten resilience.

By staying committed to these priorities, we can build a stronger, more integrated European financial system that supports innovation, protects consumers and enhances the overall resilience of our economy for all Europe’s citizens. Crises fading in the rearview mirror should not be a harbinger of shifting supervisory and regulatory priorities such that a weaker, less competitive and less resilient sector is the result.

MIL OSI Global Banks –

January 25, 2025

MIL-OSI Banking: Ida Wolden Bache: Monetary policy trade-offs in a small open economy – the case of Norway

Source: Bank for International Settlements

Presentation accompanying the speech

Introduction

Good afternoon. Let me start by thanking the Peterson Institute for the invitation and for giving me the opportunity to address this distinguished audience. It’s a pleasure to be here.

[Chart: The tightening was synchronised across countries]

The tightening of monetary policy by central banks over the past few years has been unprecedented in several respects. By some measures, this has been the most globally synchronised of all tightening episodes in the past half century.

In Norway, as in many other countries, global supply chain disruptions contributed to a rise in prices for a broad range of goods during the pandemic. When pandemic restrictions were lifted, economic activity quickly rebounded. The high level of household saving gave an additional impetus to demand. When Russia invaded Ukraine in February 2022, energy and commodity prices soared. Since Norway is a major exporter of oil and gas, those price increases constituted a positive terms-of-trade shock, and they generated large inflows into the Norwegian government’s sovereign wealth fund, the Government Pension Fund Global. But at the same time, the increases in energy prices contributed to pushing up domestic business costs and spilled over into consumer prices.

[Chart: Policy rate at 4.5% to end of year, according to forecast]

Norges Bank started a gradual normalisation of interest rates in September 2021, and our key policy rate now stands at 4.5 percent. The policy rate forecast in our latest Monetary Policy Report in September implies that the policy rate will remain at 4.5 percent to the end of this year, before being gradually reduced from first quarter 2025.

MIL OSI Global Banks –

January 25, 2025

MIL-OSI Global: Israel’s ban on UNRWA continues a pattern of politicizing Palestinian refugee aid – and puts millions of lives at risk

Source: The Conversation – USA – By Nicholas R. Micinski, Assistant Professor of Political Science and International Affairs, University of Maine

The Israeli parliament’s vote on Oct. 28, 2024, to ban the United Nations agency that provides relief for Palestinian refugees is likely to affect millions of people – it also fits a pattern.

Aid for refugees, particularly Palestinian refugees, has long been politicized, and the United Nations Relief and Works Agency for Palestine Refugees, or UNRWA, has been targeted throughout its 75-year history.

This was evident earlier in the current Gaza conflict, when at least a dozen countries, including the U.S., suspended funding to the UNRWA, citing allegations made by Israel that 12 UNRWA employees participated in the attack by Hamas on Oct. 7, 2023. In August, the U.N. fired nine UNRWA employees for alleged involvement in the attack. An independent U.N. panel established a set of 50 recommendations to ensure UNRWA employees adhere to the principle of neutrality.

The vote by the Knesset, Israel’s parliament, to ban the UNRWA goes a step further. It will, when it comes into effect, prevent the UNRWA from operating in Israel and will severely affect its ability to serve refugees in any of the occupied territories that Israel controls, including Gaza. This could have devastating consequences for livelihoods, health, the distribution of food aid and schooling for Palestinians. It would also damage the polio vaccination campaign that the UNRWA and its partner organizations have been carrying out in Gaza since September. Finally, the bill bans communication between Israeli officials and the UNRWA, which would end efforts by the agency to coordinate the movements of aid workers to prevent unintentional targeting by the Israel Defense Forces.

Refugee aid, and humanitarian aid more generally, is theoretically meant to be neutral and impartial. But as experts in migration and international relations, we know funding is often used as a foreign policy tool, whereby allies are rewarded and enemies punished. In this context, we believe Israel’s banning of the UNRWA fits a wider pattern of the politicization of aid to refugees, particularly Palestinian refugees.

What is the UNRWA?

The UNRWA, short for United Nations Relief and Works Agency for Palestine Refugees in the Near East, was established two years after about 750,000 Palestinians were expelled or fled from their homes during the months leading up to the creation of the state of Israel in 1948 and the subsequent Arab-Israeli war.

Palestinians flee their homes during the 1948 Arab-Israeli war.
Pictures from History/Universal Images Group via Getty Images

Prior to the UNRWA’s creation, international and local organizations, many of them religious, provided services to displaced Palestinians. But after surveying the extreme poverty and dire situation pervasive across refugee camps, the U.N. General Assembly, including all Arab states and Israel, voted to create the UNRWA in 1949.

Since that time, the UNRWA has been the primary aid organization providing food, medical care, schooling and, in some cases, housing for the 6 million Palestinians living across its five fields: Jordan, Lebanon, Syria, as well as the areas that make up the occupied Palestinian territories: the West Bank and Gaza Strip.

The mass displacement of Palestinians – known as the Nakba, or “catastrophe” – occurred prior to the 1951 Refugee Convention, which defined refugees as anyone with a well-founded fear of persecution owing to “events occurring in Europe before 1 January 1951.” Despite a 1967 protocol extending the definition worldwide, Palestinians are still excluded from the primary international system protecting refugees.

While the UNRWA is responsible for providing services to Palestinian refugees, the United Nations also created the U.N. Conciliation Commission for Palestine in 1948 to seek a long-term political solution and “to facilitate the repatriation, resettlement and economic and social rehabilitation of the refugees and the payment of compensation.”

As a result, UNRWA does not have a mandate to push for the traditional durable solutions available in other refugee situations. As it happened, the conciliation commission was active only for a few years and has since been sidelined in favor of the U.S.-brokered peace processes.

Is the UNRWA political?

The UNRWA has been subject to political headwinds since its inception and especially during periods of heightened tension between Palestinians and Israelis.

While it is a U.N. organization and thus ostensibly apolitical, it has frequently been criticized by Palestinians, Israelis as well as donor countries, including the United States, for acting politically.

The UNRWA performs statelike functions across its five fields, including education, health and infrastructure, but it is restricted in its mandate from performing political or security activities.

Initial Palestinian objections to the UNRWA stemmed from the organization’s early focus on economic integration of refugees into host states.

Although the UNRWA officially adhered to the U.N. General Assembly’s Resolution 194 that called for the return of Palestine refugees to their homes, U.N., U.K. and U.S. officials searched for means by which to resettle and integrate Palestinians into host states, viewing this as the favorable political solution to the Palestinian refugee situation and the broader Israeli-Palestinian conflict. In this sense, Palestinians perceived the UNRWA to be both highly political and actively working against their interests.

In later decades, the UNRWA switched its primary focus from jobs to education at the urging of Palestinian refugees. But the UNRWA’s education materials were viewed by Israel as further feeding Palestinian militancy, and the Israeli government insisted on checking and approving all materials in Gaza and the West Bank, which it has occupied since 1967.

A protester is removed by members of the U.S. Capitol Police during a House hearing on Jan. 30, 2024.
Alex Wong/Getty Images

While Israel has long been suspicious of the UNRWA’s role in refugee camps and in providing education, the organization’s operation, which is internationally funded, also saves Israel millions of dollars each year in services it would be obliged to deliver as the occupying power.

Since the 1960s, the U.S. – the UNRWA’s primary donor – and other Western countries have repeatedly expressed their desire to use aid to prevent radicalization among refugees.

In response to the increased presence of armed opposition groups, the U.S. attached a provision to its UNRWA aid in 1970, requiring that the “UNRWA take all possible measures to assure that no part of the United States contribution shall be used to furnish assistance to any refugee who is receiving military training as a member of the so-called Palestine Liberation Army (PLA) or any other guerrilla-type organization.”

The UNRWA adheres to this requirement, even publishing an annual list of its employees so that host governments can vet them, but it also employs 30,000 individuals, the vast majority of whom are Palestinian.

Questions over links of the UNRWA to any militancy has led to the rise of Israeli and international watch groups that document the social media activity of the organization’s large Palestinian staff.

In 2018, the Trump administration paused its US$60 million contribution to the UNRWA. Trump claimed the pause would create political pressure for Palestinians to negotiate. President Joe Biden restarted U.S. contributions to the UNRWA in 2021.

While other major donors restored funding to the UNRWA after the conclusion of the investigation in April, the U.S. has yet to do so.

‘An unmitigated disaster’

Israel’s ban of the UNRWA will leave already starving Palestinians without a lifeline. U.N. Secretary General António Guterres said banning the UNRWA “would be a catastrophe in what is already an unmitigated disaster.” The foreign ministers of Canada, Australia, France, Germany, Japan, South Korea and the U.K. issued a joint statement arguing that the ban would have “devastating consequences on an already critical and rapidly deteriorating humanitarian situation, particularly in northern Gaza.”

Reports have emerged of Israeli plans for private security contractors to take over aid distribution in Gaza through dystopian “gated communities,” which would in effect be internment camps. This would be a troubling move. In contrast to the UNRWA, private contractors have little experience delivering aid and are not dedicated to the humanitarian principles of neutrality, impartiality or independence.

However, the Knesset’s explicit ban could, inadvertently, force the United States to suspend weapons transfers to Israel. U.S. law requires that it stop weapons transfers to any country that obstructs the delivery of U.S. humanitarian aid. And the U.S. pause on funding for the UNRWA was only meant to be temporary.

The UNRWA is the main conduit for assistance into Gaza, and the Knesset’s ban makes explicit that the Israeli government is preventing aid delivery, making it harder for Washington to ignore. Before the bill passed, U.S. State Department Spokesperson Matt Miller warned that “passage of the legislation could have implications under U.S. law and U.S. policy.”

At the same time, two U.S. government agencies previously alerted the Biden administration that Israel was obstructing aid into Gaza, yet weapons transfers have continued unabated.

Sections of this story were first used in an earlier article published by The Conversation U.S. on Feb. 1, 2024.

The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.

– ref. Israel’s ban on UNRWA continues a pattern of politicizing Palestinian refugee aid – and puts millions of lives at risk – https://theconversation.com/israels-ban-on-unrwa-continues-a-pattern-of-politicizing-palestinian-refugee-aid-and-puts-millions-of-lives-at-risk-242379

MIL OSI – Global Reports –

January 25, 2025

MIL-OSI: Savi Financial Corporation Earns $205,000 in the Third Quarter of 2024; Results Highlighted by NIM Expansion

Source: GlobeNewswire (MIL-OSI)

MOUNT VERNON, Wash., Oct. 29, 2024 (GLOBE NEWSWIRE) — Savi Financial Corporation, Inc. (OTC Pink: SVVB), the bank holding company for SaviBank, today reported net income of $205,000, or $0.05 per diluted share, for the third quarter of 2024. This compared to a net loss of $5,000, or a loss of $0.00 per diluted share, in the second quarter of 2024, and net income of $558,000, or $0.13 per diluted share, in the third quarter of 2023. In the first nine months of 2024, the Company reported a net loss of $216,000, or a loss of $0.05 per diluted share, compared to net income of $1.59 million, or $0.36 per diluted share, in the first nine months of 2023. All results are unaudited.

“We reported improved third quarter 2024 operating results, compared to the preceding quarter, driven by increases in net interest income, lower non-interest expense and net interest margin expansion,” said Michal D. Cann, Chairman and President of Savi Financial Corporation. “Overall, loan growth was muted during the quarter, in part due to a slowdown in the local economy and uncertainties surrounding the election and future economic growth. However, we are seeing improvements in our loan pipeline, particularly with SBA loan originations. Further, we experienced good growth in core deposits during the quarter, with an increase in core deposits from local municipalities, which will allow us to reduce our reliance on brokered deposits to fund future growth.”

“Loan growth was relatively flat compared to the preceding quarter and up 5% compared to a year ago. However, we did see good growth in the loan pipelines,” said Andrew Hunter, President and CEO of SaviBank. “We continue to seek out lending opportunities from our customers and anticipate slower than historic loan growth for the remainder of the year.”

“The increase in loan yields during the quarter contributed to net interest margin (NIM) expansion of four basis points during the current quarter,” said Rob Woods, Chief Financial Officer of SaviBank. “We anticipate funding costs are near their peak and will continue to stabilize and should improve over the next few quarters if interest rates continue to decrease.” The Company’s NIM was 3.52% in the third quarter of 2024, compared to 3.48% in the preceding quarter, and 3.66% in the third quarter a year ago. The NIM remains higher than the peer average of 3.21% posted by the 171 banks that comprised the Dow Jones U.S. Microcap Bank Index as of June 30, 2024. The cost of funds increased to 244 basis points during the third quarter of 2024, compared to 238 basis points in the preceding quarter.

Merger

On March 22, 2024, the Company announced that it had signed a Purchase and Assumption agreement whereby Lakewood, WA. based Harborstone Credit Union will acquire SaviBank in an all-cash transaction. The transaction is structured as a purchase agreement with Harborstone Credit Union purchasing substantially all assets and assuming substantially all liabilities of SaviBank. The transaction is anticipated to be completed in the spring of 2025, subject to receiving all regulatory approvals. Shareholders of Savi Financial have approved the acquisition.

“We look forward to working with Harborstone Credit Union to continue our tradition of having a positive impact in our local communities,” said Cann. “We are deeply focused on providing resources and services for our customers to succeed, and believe that the additional services, products and locations Harborstone Credit Union provides will help us continue to meet the financial needs of our customers. Through the unique structure of this acquisition by Harborstone Credit Union, we believe we are maximizing value to our shareholders who have supported us over the years.”

Third Quarter 2024 Highlights:

The Company reported net income of $205,000 for the third quarter of 2024, compared to net loss of $5,000 for the second quarter of 2024, and net income of $558,000 for the third quarter of 2023.
Earnings per diluted share were $0.05 in the third quarter of 2024, compared to losses per diluted share of $0.00 in the preceding quarter, and earnings per diluted share of $0.13 in the third quarter of 2023.
Net interest income was $5.06 million in the third quarter of 2024, compared to $4.86 million in the second quarter of 2024, and $5.03 million in the third quarter of 2023.
Total revenue, consisting of net interest income and non-interest income, was $5.88 million in the third quarter of 2024, compared to $6.04 million in the preceding quarter and $5.89 million in the third quarter a year ago.
Non-interest expense was $5.57 million in the third quarter of 2024, compared to $5.82 million in the preceding quarter, and $5.56 million in the third quarter a year ago. The decrease in non-interest expense during the third quarter of 2024 was largely due to lower salary and employee benefits compared to the prior quarter.
Average third quarter 2024 total loans increased 2% to $512.8 million, compared to $503.8 million in the second quarter of 2024, and increased 8% from $473.6 million in the third quarter of 2023. Total loans at September 30, 2024, decreased to $509.5 million from $512.1 million at June 30, 2024, and increased 5% compared to $487.2 million at September 30, 2023.
SBA and USDA loan production for the twelve months ended September 30, 2024, totaled 22 loans for $14.5 million, compared to production of 18 loans for $14.8 million in the year-ago period.
Average third quarter 2024 total deposits grew 2% to $502.5 million, from $490.8 million in the preceding quarter, and increased 6% from $474.1 million in the third quarter a year ago. Total deposits increased 4% to $512.9 million, at September 30, 2024, compared to $492.1 million at June 30, 2024, and increased 7% compared to $481.5 million at September 30, 2023.
The Company recorded an $86,000 provision for credit losses in the third quarter of 2024, compared to a $255,000 provision in the second quarter of 2024, and a $350,000 credit to the provision in the third quarter of 2023.
Allowance for loan losses, as a percentage of total loans, was 1.18% at September 30, 2024, compared to 1.19% at June 30, 2024, and 1.16% at September 30, 2023.
Nonperforming loans, as a percentage of total loans, was 0.26% at September 30, 2024, compared to 0.24% at June 30, 2024, and 0.09% at September 30, 2023.
Nonperforming assets, as a percentage of total assets, was 0.21% at September 30, 2024, compared to 0.20% at June 30, 2024, and 0.19% a year ago.
Net charge-offs were $214,000 in the third quarter of 2024, compared to $35,000 in the second quarter of 2024, and $77,000 in the third quarter a year ago.
SaviBank capital levels remained above the threshold for well-capitalized institutions with a tier-1 leverage ratio of 8.19% at September 30, 2024.

About Northwest Washington

SaviBank currently operates six branches in Skagit County, two branches in Island County, one branch in Whatcom County and one branch in San Juan County. The Skagit, Whatcom, Island and San Juan counties region stretches north from the greater Seattle/Everett/Bellevue metropolis to the Canadian border.

The housing market in Skagit, Island, Whatcom and San Juan counties remains stable, although it has fallen off the record high levels from the past few years. According to the Northwest Multiple Listing Service, the average home in Skagit County sold for $560,000, up 1.91% in September 30, 2024, compared to a year ago, and there was a 2.37 month supply of homes on the market. For Island County, the average house sold for $605,000, down 0.82% from a year ago and supply totaled 3.18 months. For Whatcom County, the average home sold for $611,000, up 10.38% from a year ago and supply totaled 2.61 months. For San Juan County, the average home sold for $829,000, down from 13.65% a year ago and supply totaled 9.05 months.

Skagit’s population is projected to grow 3.84% from 2024 through 2029, and median household income is projected to increase by 11.41% during the same time frame. Whatcom County’s population is projected to grow 4.97% from 2024 through 2029, and median household income is projected to increase by 10.99%. Island County’s population is projected to grow 2.24% from 2024 through 2029, and median household income is projected to increase by 12.83%. San Juan County’s population is projected to grow 6.78% from 2024 through 2029, and median household income is projected to increase by 10.88%.

Sources:
https://www.nwmls.com/real-estate-news/monthly-market-snapshot/

https://www.capitaliq.spglobal.com/

About Savi Financial Corporation Inc. and SaviBank

Savi Financial Corporation is the bank holding company which owns SaviBank. The Bank began operations April 11, 2005, and has 10 branch locations in Anacortes, Burlington, Bellingham, Concrete, Mount Vernon (2), Oak Harbor, Freeland, Sedro-Woolley, and Friday Harbor, Washington. The Bank provides loan and deposit services to customers who are predominantly small and middle-market businesses and individuals in and around Skagit, Island, Whatcom and San Juan counties. As a locally-owned community bank, we believe that when everyone becomes Savi about their finances, our entire community benefits.
For additional information about SaviBank, visit: www.SaviBank.com.

About Harborstone Credit Union

Harborstone Credit Union is a Washington-chartered and federally insured credit union headquartered in Lakewood, Washington. Founded in 1955 as McChord Federal Credit Union, serving airmen on McChord Air Force Base (now Joint Base Lewis McChord), Harborstone Credit Union has grown to become one of the largest credit unions in Washington State with over 91,000 members and approximately $2.1 billion in total assets. Harborstone Credit Union has sixteen branches located throughout King, Pierce, and Thurston counties and offers members a full range of products and services with the aim to assist members in achieving financial well-being through innovative financial solutions that foster thriving communities and economic vitality. For more information, please visit www.harborstone.com.

Forward Looking Statements

Certain statements in this news release contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to future plans and expectations, and are thus prospective. Such forward-looking statements are subject to risks, uncertainties, and other factors, such as the businesses of Harborstone Credit Union and SaviBank may not be integrated successfully or such integration may take longer to accomplish than expected, the expected cost savings and any revenue synergies from the acquisition may not be fully realized within the expected timeframes, disruption from the acquisition may make it more difficult to maintain relationships with customers, associates, or suppliers, the required governmental approvals of the acquisition may not be obtained on the proposed terms and schedule, or Savi Financial shareholders may not approve the acquisition, any of which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. Therefore, we can give no assurance that the results contemplated in the forward-looking statements will be realized. The inclusion of this forward-looking information should not be construed as a representation by the companies or any person that the future events, plans, or expectations contemplated by the companies will be achieved. All subsequent written and oral forward-looking statements concerning the companies or any person acting on their behalf is expressly qualified in its entirety by the cautionary statements above. None of Harborstone Credit Union, Savi Financial or SaviBank undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, to reflect circumstances or events that occur after the date the forward-looking statements are made.


SELECTED FINANCIAL DATA
(In thousands of dollars, except for ratios and per share amounts)
Unaudited
	Three Months Ended													Nine Months Ended
	September 30, 2024			September 30, 2023			Var %		June 30, 2024			Var %		September 30, 2024			September 30, 2023			Var %
SUMMARY OF OPERATIONS
Interest income	$	8,756		$	7,573		16	%	$	8,371		5	%	$	24,962		$	21,092		18	%
Interest expense		(3,698	)		(2,539	)	46			(3,509	)	5			(10,411	)		(6,092	)	71
Net interest income		5,058			5,034		0			4,862		4			14,551			15,000		(3	)
Provision for loan losses		(86	)		350		(125	)		(255	)	(66	)		(578	)		539		(207	)

NII after loss provision		4,972			5,384		(8	)		4,607		8			13,973			15,539		(10	)
Non-interest income		825			852		(3	)		1,181		(30	)		2,587			2,796		(7	)
Non-interest expense		(5,566	)		(5,559	)	0			(5,823	)	(4	)		(16,920	)		(16,415	)	3
Income before tax		231			677		(66	)		(35	)	(760	)		(360	)		1,920		(119	)
Federal income tax expense		26			119		(78	)		(30	)	(187	)		(144	)		333		(143	)
Net income	$	205		$	558		(63	)%	$	(5	)	(4,200	)%	$	(216	)	$	1,587		(114	)%

PER COMMON SHARE DATA
Number of shares outstanding (000s)		3,465			3,460		0	%		3,465		—	%		3,465			3,460		0.14	%
Earnings per share, basic	$	0.06		$	0.16		(63	)	$	(0.00	)	(4,200	)	$	(0.06	)	$	0.46		(114	)
Earnings per share, diluted	$	0.05		$	0.13		(63	)	$	(0.00	)	(4,201	)	$	(0.05	)	$	0.36		(114	)
Market value		14.50			6.86		111			14.79		(2	)		14.50			6.86		111
Book value		10.93			10.95		(0	)		10.61		3			10.93			10.95		(0	)
Market value to book value		132.63	%		62.65	%	112			139.40	%	(5	)		132.63	%		62.65	%	112

BALANCE SHEET DATA
Assets	$	623,637		$	591,370		5	%	$	621,191		0	%	$	623,637		$	591,370		5	%
Investments securities		36,629			35,140		4			34,698		6			36,629			35,140		4
Total loans		509,535			487,184		5			512,080		(0	)		509,535			487,184		5
Total deposits		512,912			481,476		7			492,140		4			512,912			481,476		7
Borrowings		52,500			52,500		–			72,000		(27	)		52,500			52,500		–
Sub Debt – Savi Financial Only		17,000			17,000		–			17,000		–			17,000			17,000		–
Shareholders’ equity		37,881			37,887		(0	)		36,777		3			37,881			37,887		(0	)

AVERAGE BALANCE SHEET DATA
Average assets	$	622,414		$	583,931		7	%	$	612,262		2	%	$	608,559		$	557,460		9	%
Average total loans		512,751			473,590		8			503,793		2			502,860			459,765		9
Average total deposits		502,526			474,076		6			490,753		2			498,373			456,093		9
Average shareholders’ equity		37,329			37,812		(1	)		36,678		2			37,534			37,082		1

ASSET QUALITY RATIOS
Net (charge-offs) recoveries	$	(214	)	$	(77	)	N/M		$	(35	)	N/M		$	(422	)	$	(266	)	N/M
Net (charge-offs) recoveries to average loans		(0.17	)%		(0.07	)%	N/M			(0.03	)%	N/M			(0.11	)%		(0.08	)%	N/M
Non-performing loans as a % of loans		0.26			0.09		183			0.24		6			0.26			0.09		183
Non-performing assets as a % of assets		0.21			0.19		10			0.20		4			0.21			0.19		10
Allowance for loan losses as a % of total loans		1.18			1.16		2			1.19		(1	)		1.18			1.16		2
Allowance for loan losses as a % of non-performing loans		462.69			1,223.59		(62	)		492.30		(6	)		462.69			1,223.59		(62	)

FINANCIAL RATIOSSTATISTICS
Return on average equity		2.20	%		5.90	%	(63	)%		-0.05	%	(4,128	)%		-0.77	%		5.71	%	(113	)%
Return on average assets		0.13			0.38		(66	)		(0.00	)	(4,133	)		(0.05	)		0.38		(112	)
Net interest margin		3.52			3.66		(4	)		3.48		1			3.47			3.77		(8	)
Efficiency ratio		81.59			92.23		(12	)		83.37		(2	)		85.53			92.24		(7	)
Average number of employees (FTE)		136			145		(6	)		140		(3	)		142			146		(3	)

CAPITAL RATIOS

Tier 1 leverage ratio — Bank		8.19			8.24		(1	)%		8.27		(1	)%		8.19			8.24		(1	)%
Common equity tier 1 ratio — Bank		9.59			9.08		6			9.36		2			9.59			9.08		6
Tier 1 risk-based capital ratio — Bank		9.59			9.08		6			9.36		2			9.59			9.08		6
Total risk-based capital ratio –Bank		10.78			10.22		5			10.56		2			10.78			10.22		5

Contact:
Michal D. Cann
Chairman & President
Savi Financial Corporation
(360) 399-7001

The MIL Network –

January 25, 2025

MIL-OSI Europe: The EBA asks for input to entities falling within the scope of initial margin model authorisation under the revised European Market Infrastructure Regulation

Source: European Banking Authority

The European Banking Authority (EBA), in cooperation with the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA), launched today a short survey addressed to entities within the scope of the initial margin (IM) model authorisation regime introduced by the upcoming revised European Market Infrastructure Regulation (EMIR 3). The deadline for submitting responses is Friday 29 November 2024.

EMIR 3 will introduce important novelties, such as:

an authorisation regime for IM models used by counterparties in the EU;
a new EBA central validation function for pro-forma margin models (such as ISDA SIMM);
a supervision of IM models with greater focus on larger counterparties.

The EBA, in cooperation with ESMA and EIOPA, is seeking general information on entities within the scope of IM model authorisation, as well as specific information relevant for fee calculation and on initial margins and IM models used.

This information will guide the EBA in the setup of its central validation function and inform the EBA’s response to the EU Commission’s Call for advice on a possible Delegated Act on fees received on 31 July 2024. The information will also be used to develop proportionate requirements for entities within the scope of IM model authorisation, especially for smaller entities (the so called “Phase 5” and “Phase 6” entities) – as part of upcoming mandates under EMIR 3.

Consultation process

Entities currently subject to the requirement to exchange initial margin – in accordance with EMIR and under Article 36 of Commission Delegated Regulation (EU) 2016/2251 (the joint ESAs RTS on uncleared OTC derivatives) – and using at least one IM model to comply with that requirement, are expected to fill in the survey. All entities of a group that are subject to this requirement are expected to fill in the survey separately, at entity level.

Responses should be submitted by Friday, 29 November 2024, via the online tool that can be accessed under the following link: https://ec.europa.eu/eusurvey/runner/IMMVEMIR3

To access the survey, a password must be used, which can be obtained from trade associations and competent authorities. Non-supervised entities can contact eba-immv@eba.europa.eu.

Questions on the survey should be submitted via the contact form available in the online survey tool.

Next steps

Closer to the EMIR 3 publication, the EBA will publish on its website operational clarifications aimed to ensure a smooth, convergent entry into force of EMIR 3 requirements in the EU.

Legal basis and background

On 7 December 2022, the Commission published its proposal to amend EMIR as regards measures to mitigate excessive exposures to third-country central counterparties and improve the efficiency of Union clearing markets. On 7 February 2024, the European Parliament and the Council reached a political agreement on a compromise text (EMIR 3), which was formally endorsed by the two institutions respectively on 4 March 2024 and 14 February 2024.

EMIR 3 is expected, in accordance with its Article 11(12a), to grant EBA the additional task to set up a central validation function for the elements and general aspects of pro-forma models (such as ISDA SIMM), and changes thereto, used or to be used by a subset of financial and non-financial counterparties as part of the risk mitigation techniques used on their portfolios of non-centrally cleared OTC derivatives.

On 31 July 2024, the EBA received a Call for advice on a possible Delegated Act on fees to be charged to financial and non-financial counterparties requiring the validation by EBA of pro-forma models, with the request to submit its response by Q2 2025. As part of its response, the EBA is requested to provide a ‘quantitative and qualitative cost-benefit analysis of all the options considered and proposed’ and to ‘widely consult market participants’.

MIL OSI Europe News –

January 25, 2025

MIL-OSI: First Financial Northwest, Inc. Reports Third Quarter 2024 Results

Source: GlobeNewswire (MIL-OSI)

RENTON, Wash., Oct. 29, 2024 (GLOBE NEWSWIRE) — First Financial Northwest, Inc. (the “Company”) (NASDAQ GS: FFNW), the holding company for First Financial Northwest Bank (the “Bank”), today reported a net loss of $608,000, or $(0.07) per diluted share, for the quarter ended September 30, 2024, compared to net income of $1.6 million, or $0.17 per diluted share, for the quarter ended June 30, 2024, and net income of $1.5 million, or $0.16 per diluted share, for the quarter ended September 30, 2023. For the nine months ended September 30, 2024, the Company reported a net loss of $128,000, or $(0.01) per diluted share, compared to net income of $5.1 million, or $0.56 per diluted share, for the comparable period in 2023.

The net loss for the quarter was primarily the result of a $1.6 million provision for credit losses. Our allowance for credit losses (“ACL”) analysis determined that a provision for credit losses of $1.6 million was appropriate as of September 30, 2024. This provision mainly relates to two participation loans totaling $6.0 million, for which we are not the lead lender. These loans, secured by short-term rehabilitation and assisted living facilities, have been individually evaluated and classified as “substandard” since March 2022 due to a decline in demand for the services provided at such facilities post-COVID. While payments on the loans were current as of September 30, 2024, updated appraisals received during the quarter resulted in an increase in our ACL. The loan guarantors are under contract to sell another property, with the sale expected to close in the fourth quarter of 2024. Proceeds from this sale are expected to be applied to the two loans, which would improve our position. Additionally, the guarantors reported interest from a national real estate developer in purchasing one of the facilities, though no purchase agreement was entered into as of September 30, 2024. The ACL was also impacted by higher forecasted unemployment rates and increased construction and land development loan balances. Additionally, reserves for unfunded commitments increased by $75,000 due to increased construction lending activity during the quarter.

“While we recorded a provision for credit losses during the quarter ended September 30, 2024, our credit quality remained strong, with only $853,000 in nonaccrual loans relative to our $1.14 billion total loan portfolio. Our strong credit quality is directly related to our top-notch lending department employees who originate, document and underwrite these loans,” stated Joseph W. Kiley III, President and CEO.

“We also continue to work closely with Global Federal Credit Union (“Global”) to prepare for the closing of the pending transaction and to ensure a smooth transition for our customers and employees. I truly appreciate the efforts and patience of our employees, customers, and shareholders as we await the final required approval from the National Credit Union Administration before we can close the transaction,” concluded Kiley.

Highlights for the quarter ended September 30, 2024:

Net loans receivable totaled $1.13 billion at September 30, 2024, down $8.9 million from the prior quarter end.
Book value per share was $17.39 at September 30, 2024, compared to $17.51 at June 30, 2024, and $17.35 at September 30, 2023.
The Bank’s Tier 1 leverage and total capital ratios were 10.9% and 16.7% at September 30, 2024, compared to 10.9% and 16.6% at June 30, 2024, and 10.3% and 16.0% at September 30, 2023, respectively.
Credit quality remained strong with nonaccrual loans totaling only $853,000, or 0.07% of total loans.
A $1.6 million provision for credit losses was recorded in the current quarter, compared to a $200,000 recapture of provision for credit losses in the prior quarter and a $300,000 recapture of provision for credit losses in the comparable quarter in 2023.

Deposits totaled $1.17 billion at September 30, 2024, compared to $1.09 billion at June 30, 2024, and $1.21 billion at September 30, 2023. The $79.2 million increase in deposits at September 30, 2024, compared to June 30, 2024, was due primarily to a $81.9 million increase in retail certificates of deposit and a $624,000 increase in noninterest-bearing demand deposits, partially offset by a $1.5 million, $1.4 million, $392,000, and $104,000 decline in interest-bearing demand deposits, money market deposits, savings and brokered deposits, respectively. The increased deposits were used to pay down our FHLB advances to $100.0 million at September 30, 2024, from $176.0 million at June 30, 2024.

Advances from the FHLB totaled $100.0 million at September 30, 2024, down from $176.0 million at June 30, 2024, and $125.0 million at September 30, 2023, as the increase in deposits during the current quarter allowed us to reduce our reliance on FHLB advances. At September 30, 2024, the $100.0 million in FHLB advances were tied to cash flow hedge agreements where the Bank pays a fixed rate and receives a variable rate in return to assist in the Bank’s interest rate risk management efforts. These cash flow hedge agreements had a weighted average remaining term of 30.8 months and a weighted average fixed interest rate of 1.93% as of September 30, 2024. The average cost of borrowings was 3.19% for the quarter ended September 30, 2024, compared to 2.64% for the quarter ended June 30, 2024, and 2.42% for the quarter ended September 30, 2023.

The following table presents a breakdown of our total deposits (unaudited):

	Sep 30, 2024		Jun 30, 2024		Sep 30, 2023		Three Month Change			One Year Change
Deposits:	(Dollars in thousands)
Noninterest-bearing demand	$	100,466	$	99,842	$	104,164	$	624		$	(3,698	)
Interest-bearing demand		55,506		57,033		60,816		(1,527	)		(5,310	)
Savings		17,031		17,423		18,844		(392	)		(1,813	)
Money market		495,978		497,345		501,168		(1,367	)		(5,190	)
Certificates of deposit, retail		447,474		365,527		349,446		81,947			98,028
Brokered deposits		50,900		51,004		175,972		(104	)		(125,072	)
Total deposits	$	1,167,355	$	1,088,174	$	1,210,410	$	79,181		$	(43,055	)

The following tables present an analysis of total deposits by branch office (unaudited):

September 30, 2024
	Noninterest-bearing demand		Interest-bearing demand		Savings		Money market		Certificates of deposit, retail		Brokered deposits		Total
	(Dollars in thousands)
King County
Renton	$	29,388	$	14,153	$	10,654	$	305,836	$	315,721	$	–	$	675,752
Landing		3,442		1,660		237		8,348		12,733		–		26,420
Woodinville		1,968		2,234		959		8,852		11,522		–		25,535
Bothell		2,965		1,151		401		1,536		5,918		–		11,971
Crossroads		14,770		2,039		107		31,665		18,136		–		66,717
Kent		5,417		10,502		44		16,053		8,562		–		40,578
Kirkland		10,967		1,890		206		11,243		2,240		–		26,546
Issaquah		1,186		294		18		2,547		6,580		–		10,625
Total King County		70,103		33,923		12,626		386,080		381,412		–		884,144
Snohomish County
Mill Creek		3,990		2,171		384		14,628		10,312		–		31,485
Edmonds		9,254		6,831		330		18,549		13,281		–		48,245
Clearview		5,587		5,242		1,462		21,206		12,251		–		45,748
Lake Stevens		3,970		4,282		1,244		23,257		15,571		–		48,324
Smokey Point		2,994		1,664		969		29,353		11,387		–		46,367
Total Snohomish County		25,795		20,190		4,389		106,993		62,802		–		220,169
Pierce County
University Place		2,940		53		4		1,848		1,458		–		6,303
Gig Harbor		1,628		1,340		12		1,057		1,802		–		5,839
Total Pierce County		4,568		1,393		16		2,905		3,260		–		12,142

Brokered deposits		–		–		–		–		–		50,900		50,900

Total deposits	$	100,466	$	55,506	$	17,031	$	495,978	$	447,474	$	50,900	$	1,167,355

June 30, 2024
	Noninterest-bearing demand		Interest-bearing demand		Savings		Money market		Certificates of deposit, retail		Brokered deposits		Total
	(Dollars in thousands)
King County
Renton	$	30,336	$	14,380	$	11,186	$	306,176	$	246,076	$	–	$	608,154
Landing		2,079		566		113		7,895		9,881		–		20,534
Woodinville		1,953		2,949		987		10,931		10,845		–		27,665
Bothell		3,336		847		398		1,595		6,055		–		12,231
Crossroads		13,585		2,858		28		25,599		17,748		–		59,818
Kent		7,729		8,142		42		14,525		7,448		–		37,886
Kirkland		8,326		1,789		210		15,007		1,752		–		27,084
Issaquah		1,287		232		22		3,971		6,202		–		11,714
Total King County		68,631		31,763		12,986		385,699		306,007		–		805,086
Snohomish County
Mill Creek		5,823		2,306		420		15,209		9,578		–		33,336
Edmonds		10,418		9,470		402		20,255		12,753		–		53,298
Clearview		4,810		4,888		1,444		18,695		9,504		–		39,341
Lake Stevens		4,111		4,445		1,171		22,618		14,090		–		46,435
Smokey Point		2,700		3,152		982		31,808		10,435		–		49,077
Total Snohomish County		27,862		24,261		4,419		108,585		56,360		–		221,487
Pierce County
University Place		2,385		41		2		1,819		1,503		–		5,750
Gig Harbor		964		968		16		1,242		1,657		–		4,847
Total Pierce County		3,349		1,009		18		3,061		3,160		–		10,597

Brokered deposits		–		–		–		–		–		51,004		51,004

Total deposits	$	99,842	$	57,033	$	17,423	$	497,345	$	365,527	$	51,004	$	1,088,174

Net loans receivable totaled $1.13 billion at September 30, 2024, compared to $1.14 billion at June 30, 2024, and $1.17 billion at September 30, 2023. During the quarter ended September 30, 2024, loan repayments outpaced new loan fundings across all loan categories except construction and land development. The average balance of net loans receivable totaled $1.13 billion for the quarter ended September 30, 2024, compared to $1.14 billion for the quarter ended June 30, 2024, and $1.17 billion for the quarter ended September 30, 2023.

The ACL represented 1.42% of total loans receivable at September 30, 2024, compared to 1.29% at both June 30, 2024, and September 30, 2023.

Nonaccrual loans totaled $853,000 at September 30, 2024, compared to $4.7 million at June 30, 2024, and $201,000 at September 30, 2023. The decrease compared to the prior quarter was due primarily to the payoff of a $4.1 million commercial real estate loan that had been reported as nonaccrual as of June 30, 2024. The Bank did not incur any loss related to this credit. Additionally, there was no other real estate owned at September 30, 2024, June 30, 2024, or September 30, 2023.

Net interest income totaled $8.5 million for the quarter ended September 30, 2024, compared to $9.0 million for the quarter ended June 30, 2024, and $9.7 million for the quarter ended September 30, 2023.

Total interest income was $19.4 million for the quarter ended September 30, 2024, compared to $19.3 million for the quarter ended June 30, 2024, and $19.7 million for the quarter ended September 30, 2023. The increase in total interest income during the current quarter was primarily due to interest income on interest-earning deposits held with banks which increased to $863,000 in the quarter ended September 30, 2024, up 79.0% from $482,000 in the quarter ended June 30, 2024, partially offset by decreases in interest income on loans and investments of $147,000 or 0.9% and $142,000 or 7.5%, respectively. The decrease in total interest income during the current quarter compared to the comparable quarter in 2023, was primarily due to decreases in interest income on loans of $260,000 or 1.5% and on investments of $374,000 or 17.7%, partially offset by increases in interest income on interest-earning deposits held with banks and dividends on FHLB stock of $338,000 or 64.4% and $37,000 or 32.7%, respectively.

Yield on loans decreased to 5.86% during the recent quarter from 5.93% for the quarter ended June 30, 2024, and increased from 5.73% for the quarter ended September 30, 2023. During the June 30, 2024 quarter, the Bank modified over $130 million in loans under its agreement with Global, resulting in a $214,000 increase in net deferred loan fees and costs, which increased the loan yield. In the most recent quarter, these fees and costs decreased by $266,000. The yield on investment securities for the current quarter was 4.30%, down from 4.38% last quarter and up from 3.98% a year ago.

Total interest expense was $11.0 million for the quarter ended September 30, 2024, compared to $10.3 million for the quarter ended June 30, 2024, and $10.0 million for the quarter ended September 30, 2023. The increase from the quarters ended June 30, 2024 and September 30, 2023, was due to increases in funding costs. Interest expense on deposits increased $250,000 or 2.6% to $9.7 million, while interest expense on other borrowings increased $364,000 or 42.9% to $1.2 million during the current quarter, compared to the prior quarter. The increase in interest expense on deposits was primarily due to a $32.5 million increase in the average balances of certificates of deposit, partially offset by declines of $28.9 million and $10.7 million in the average balances of brokered deposits and money market deposits, respectively. In addition, the average cost of interest-bearing deposits was 3.80% for the quarter ended September 30, 2024, up from 3.71% for the quarter ended June 30, 2024. The increase in interest expense on other borrowings was due to a $22.4 million increase in the average balance of borrowings, coupled with a 55-basis point increase in the average cost of other borrowings to 3.19% during the quarter ended September 30, 2024, compared to the prior quarter. The increase in interest expense during the current quarter compared to the same quarter in 2023, was also due to increases in both the average balance and cost of outstanding borrowings, which increased by $26.1 million and 77 basis points, respectively.

Net interest margin was 2.46% for the quarter ended September 30, 2024, compared to 2.66% for the quarter ended June 30, 2024, and 2.69% for the quarter ended September 30, 2023. The decrease in the net interest margin for the quarter ended September 30, 2024, was due primarily to continued pressure on funding costs. The average yield on interest-earning assets decreased seven basis points to 5.66% during the quarter ended September 30, 2024, from 5.73% during the quarter ended June 30, 2024, and increased 20 basis points from 5.46% during the quarter ended September 30, 2023. The average cost of interest-bearing liabilities increased 13 basis points to 3.72% during the quarter, from 3.59% during the quarter ended June 30, 2024, and increased 48 basis points from 3.24% during the quarter ended September 30, 2023. The net interest margin for the month of September 2024 was 2.49%.

Noninterest income for the quarter ended September 30, 2024, totaled $677,000, up slightly from $673,000 for the quarter ended June 30, 2024, and unchanged from $677,000 for the quarter ended September 30, 2023. The increase compared to the quarter ended June 30, 2024, was primarily due to fluctuations related to our fintech focused venture capital investment more than offsetting the decreases in BOLI income, wealth management revenue and deposit and loan related fees in the quarter.

Noninterest expense totaled $8.5 million for the quarter ended September 30, 2024, compared to $7.9 million for the prior quarter, and $8.8 million for the same period in 2023. The increase from the June 30, 2024 quarter was primarily due to a $789,000 increase in salaries and employee benefits. This was because the June 2024 quarter included $939,000 in deferred loan costs related to loan modifications, which reduced salary and employee benefit expenses, compared to $117,000 in deferred loan costs in the quarter ended September 30, 2024. Partially offsetting this was a $411,000 refund from the defined benefit plan buyout following a final census review of remaining plan participants. Professional fees also declined by $164,000 in the current quarter, largely due to a $101,000 decline in transaction-related expenses and a $54,000 decline in legal fees. Compared to the September 30, 2023 quarter, the decline in noninterest expense was primarily due to a $412,000 decrease in salaries and employee benefits, a $51,000 decrease in marketing expenses, a $35,000 decline in regulatory assessments, and $10,000 in lower occupancy and equipment expense. These reductions were partially offset by higher data processing, other general and administrative expenses and professional fees.

First Financial Northwest, Inc. is the parent company of First Financial Northwest Bank; an FDIC insured Washington State-chartered commercial bank headquartered in Renton, Washington, serving the Puget Sound Region through 15 full-service banking offices. For additional information about us, please visit our website at ffnwb.com and click on the “Investor Relations” link at the bottom of the page.

Forward-looking statements:
When used in this press release and in other documents filed with or furnished to the Securities and Exchange Commission (the “SEC”), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts but instead represent management’s current expectations and forecasts regarding future events many of which are inherently uncertain and outside of our control. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, assumptions and statements about, among other things, our pending transaction with Global Federal Credit Union (“Global”) whereby Global, pursuant to the definitive purchase and assumption agreement (the “P&A Agreement”), will acquire substantially all of the assets and assume substantially all of the liabilities of the Bank, expectations of the business environment in which we operate, projections of future performance or financial items, perceived opportunities in the market, potential future credit experience, and statements regarding our mission and vision. These forward-looking statements are based on current management expectations and may, therefore, involve risks and uncertainties. Actual results may differ, possibly materially from those currently expected or projected in these forward-looking statements made by, or on behalf of, us and could negatively affect our operating and stock performance. Factors that could cause our actual results to differ materially from those described in the forward-looking statements, include, but are not limited to, the following: the occurrence of any event, change or other circumstances that could give rise to the right of one or all of the parties to terminate the P&A Agreement; delays in completing the P&A Agreement; the failure to obtain necessary regulatory approvals or to satisfy any of the other conditions to the Global transaction, including the P&A Agreement, on a timely basis or at all; delays or other circumstances arising from the dissolution of the Bank and the Company following completion of the P&A Agreement; diversion of management’s attention from ongoing business operations and opportunities during the pending Global transaction; potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement of the Global transaction; adverse impacts to economic conditions in our local market areas, other markets where the Company has lending relationships, or other aspects of the Company’s business operations or financial markets, including, without limitation, as a result of employment levels, labor shortages and the effects of inflation, a recession or slowed economic growth; changes in the interest rate environment, including increases or decreases in the Federal Reserve benchmark rate and duration at which such interest rate levels are maintained, which could adversely affect our revenues and expenses, the value of assets and obligations, and the availability and cost of capital and liquidity; the impact of inflation and the current and future monetary policies of the Federal Reserve in response thereto; the effects of any federal government shutdown; increased competitive pressures; legislative and regulatory changes; the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor and depositor sentiment; disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on the third-party vendors who perform several of our critical processing functions; effects of critical accounting policies and judgments, including the use of estimates in determining the fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; the effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, civil unrest and other external events on our business; and other factors described in the Company’s latest Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other reports filed with or furnished to the Securities and Exchange Commission – that are available on our website at www.ffnwb.com and on the SEC’s website at www.sec.gov.

Any of the forward-looking statements that we make in this Press Release and in the other public statements are based upon management’s beliefs and assumptions at the time they are made and may turn out to be wrong because of the inaccurate assumptions we might make, because of the factors illustrated above or because of other factors that we cannot foresee. Therefore, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

For more information, contact:
Joseph W. Kiley III, President and Chief Executive Officer
Rich Jacobson, Executive Vice President and Chief Financial Officer
(425) 255-4400

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Dollars in thousands) (Unaudited)

Assets	Sep 30, 2024			Jun 30, 2024			Sep 30, 2023			Three Month Change		One Year Change

Cash on hand and in banks	$	8,423		$	10,811		$	8,074		(22.1	)%	4.3	%
Interest-earning deposits with banks		72,884			48,173			49,618		51.3		46.9
Investments available-for-sale, at fair value		156,609			160,693			204,975		(2.5	)	(23.6	)
Investments held-to-maturity, at amortized cost		2,462			2,456			2,450		0.2		0.5
Loans receivable, net of allowance of $16,265, $14,796, and $15,306 respectively		1,126,146			1,135,067			1,168,079		(0.8	)	(3.6	)
Federal Home Loan Bank (“FHLB”) stock, at cost		5,403			8,823			6,803		(38.8	)	(20.6	)
Accrued interest receivable		6,638			6,632			7,263		0.1		(8.6	)
Deferred tax assets, net		2,690			2,360			3,156		14.0		(14.8	)
Premises and equipment, net		18,584			19,007			19,921		(2.2	)	(6.7	)
Bank owned life insurance (“BOLI”), net		38,661			38,368			37,398		0.8		3.4
Prepaid expenses and other assets		8,898			11,447			13,673		(22.3	)	(34.9	)
Right of use asset (“ROU”), net		2,473			2,670			2,818		(7.4	)	(12.2	)
Goodwill		889			889			889		0.0		0.0
Core deposit intangible, net		326			357			451		(8.7	)	(27.7	)
Total assets	$	1,451,086		$	1,447,753		$	1,525,568		0.2		(4.9	)

Liabilities and Stockholders’ Equity

Deposits
Noninterest-bearing deposits	$	100,466		$	99,842		$	104,164		0.6		(3.6	)
Interest-bearing deposits		1,066,889			988,332			1,106,246		7.9		(3.6	)
Total deposits		1,167,355			1,088,174			1,210,410		7.3		(3.6	)
Advances from the FHLB		100,000			176,000			125,000		(43.2	)	(20.0	)
Advance payments from borrowers for taxes and insurance		5,211			2,764			4,760		88.5		9.5
Lease liability, net		2,673			2,866			3,011		(6.7	)	(11.2	)
Accrued interest payable		294			1,117			2,646		(73.7	)	(88.9	)
Other liabilities		15,340			16,139			20,506		(5.0	)	(25.2	)
Total liabilities		1,290,873			1,287,060			1,366,333		0.3		(5.5	)

Commitments and contingencies

Stockholders’ Equity
Preferred stock, $0.01 par value; authorized 10,000,000 shares; no shares issued or outstanding		–			–			–		n/a		n/a
Common stock, $0.01 par value; authorized 90,000,000 shares; issued and outstanding
9,213,969 shares at September 30, 2024; 9,179,825 shares at June 30, 2024; and 9,179,510 shares at September 30, 2023		92			92			92		0.0		0.0
Additional paid-in capital		72,916			72,953			72,926		(0.1	)	(0.0	)
Retained earnings		93,692			94,300			96,206		(0.6	)	(2.6	)
Accumulated other comprehensive loss, net of tax		(6,487	)		(6,652	)		(9,989	)	(2.5	)	(35.1	)
Total stockholders’ equity		160,213			160,693			159,235		(0.3	)	0.6
Total liabilities and stockholders’ equity	$	1,451,086		$	1,447,753		$	1,525,568		0.2	%	(4.9	)%

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES Consolidated Income Statements (Dollars in thousands, except per share data) (Unaudited)

	Quarter Ended
	Sep 30, 2024			Jun 30, 2024			Sep 30, 2023			Three Month Change		One Year Change
Interest income
Loans, including fees	$	16,658		$	16,805		$	16,918		(0.9	)%	(1.5	)%
Investments		1,744			1,886			2,118		(7.5	)	(17.7	)
Interest-earning deposits with banks		863			482			525		79.0		64.4
Dividends on FHLB Stock		150			144			113		4.2		32.7
Total interest income		19,415			19,317			19,674		0.5		(1.3	)
Interest expense
Deposits		9,748			9,498			9,205		2.6		5.9
Other borrowings		1,213			849			766		42.9		58.4
Total interest expense		10,961			10,347			9,971		5.9		9.9
Net interest income		8,454			8,970			9,703		(5.8	)	(12.9	)
Provision (recapture of provision) for credit losses		1,575			(200	)		(300	)	(887.5	)	(625.0	)
Net interest income after provision (recapture of provision) for credit losses		6,879			9,170			10,003		(25.0	)	(31.2	)

Noninterest income
BOLI income		295			310			244		(4.8	)	20.9
Wealth management revenue		42			54			53		(22.2	)	(20.8	)
Deposit related fees		236			240			247		(1.7	)	(4.5	)
Loan related fees		96			97			79		(1.0	)	21.5
Other income (expense), net		8			(28	)		54		(128.6	)	(85.2	)
Total noninterest income		677			673			677		0.6		0.0

Noninterest expense
Salaries and employee benefits		4,606			3,817			5,018		20.7		(8.2	)
Occupancy and equipment		1,183			1,225			1,193		(3.4	)	(0.8	)
Professional fees		585			749			553		(21.9	)	5.8
Data processing		838			856			742		(2.1	)	12.9
Regulatory assessments		165			170			200		(2.9	)	(17.5	)
Insurance and bond premiums		113			118			111		(4.2	)	1.8
Marketing		46			47			97		(2.1	)	(52.6	)
Other general and administrative		952			959			856		(0.7	)	11.2
Total noninterest expense		8,488			7,941			8,770		6.9		(3.2	)
(Loss) income before federal income tax (benefit) provision		(932	)		1,902			1,910		(149.0	)	(148.8	)
Federal income tax (benefit) provision		(324	)		347			409		(193.4	)	(179.2	)
Net (loss) income	$	(608	)	$	1,555		$	1,501		(139.1	)%	(140.5	)%

Basic (loss) earnings per share	$	(0.07	)	$	0.17		$	0.16
Diluted (loss) earnings per share	$	(0.07	)	$	0.17		$	0.16
Weighted average number of common shares outstanding		9,190,146			9,168,414			9,127,568
Weighted average number of diluted shares outstanding		9,190,146			9,235,446			9,150,059

The following table presents a breakdown of the loan portfolio (unaudited):

	September 30, 2024					June 30, 2024					September 30, 2023
	Amount			Percent		Amount			Percent		Amount			Percent
	(Dollars in thousands)
Commercial real estate:
Residential:
Multifamily	$	132,811		11.6	%	$	134,302		11.7	%	$	140,022		11.7	%
Total multifamily residential		132,811		11.6			134,302		11.7			140,022		11.7

Non-residential:
Retail		118,840		10.4			118,154		10.4			130,101		11.0
Office		73,778		6.5			74,032		6.4			72,773		6.1
Hotel / motel		54,716		4.8			55,018		4.8			63,954		5.4
Storage		32,443		2.8			32,636		2.8			33,229		2.8
Mobile home park		22,443		2.0			23,159		2.0			21,285		1.8
Warehouse		18,743		1.6			18,868		1.6			19,446		1.6
Nursing Home		11,407		1.0			11,474		1.0			11,676		1.0
Other non-residential		30,719		2.7			32,139		2.8			42,227		3.7
Total non-residential		363,089		31.8			365,480		31.8			394,691		33.4

Construction/land:
One-to-four family residential		42,846		3.8			39,908		3.5			43,532		3.7
Multifamily		7,227		0.6			6,078		0.5			2,043		0.2
Land development		10,148		0.8			9,800		0.8			9,766		0.8
Total construction/land		60,221		5.2			55,786		4.8			55,341		4.7

One-to-four family residential:
Permanent owner occupied		279,744		24.5			283,516		24.7			260,970		22.1
Permanent non-owner occupied		221,127		19.4			225,423		19.6			232,238		19.6
Total one-to-four family residential		500,871		43.9			508,939		44.3			493,208		41.7

Business:
Aircraft		–		0.0			–		0.0			1,981		0.2
Small Business Administration (“SBA”)		1,745		0.2			1,763		0.2			1,810		0.3
Paycheck Protection Plan (“PPP”)		238		0.0			316		0.0			551		0.0
Other business		12,416		1.1			12,984		1.1			23,633		1.9
Total business		14,399		1.3			15,063		1.3			27,975		2.4

Consumer:
Classic, collectible and other auto		58,085		5.1			56,758		4.9			59,955		5.1
Other consumer		12,935		1.1			13,535		1.2			12,193		1.0
Total consumer		71,020		6.2			70,293		6.1			72,148		6.1

Total loans		1,142,411		100.0	%		1,149,863		100.0	%		1,183,385		100.0	%
Less:
ACL		16,265					14,796					15,306
Loans receivable, net	$	1,126,146				$	1,135,067				$	1,168,079

Concentrations of credit: ⁽¹⁾
Construction loans as % of total capital		36.8	%				34.8	%				37.8	%
Total non-owner occupied commercial real estate as % of total capital		296.2	%				298.8	%				328.1	%

_{⁽¹⁾ Concentrations of credit percentages are for First Financial Northwest Bank only using classifications in accordance with FDIC regulatory guidelines.}

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES Key Financial Measures (Unaudited)

	At or For the Quarter Ended
	Sep 30,			Jun 30,			Mar 31,			Dec 31,			Sep 30,
		2024			2024			2024			2023			2023
	(Dollars in thousands, except per share data)
Performance Ratios: ⁽¹⁾
Return on assets		(0.17	)%		0.43	%		(0.29	)%		0.31	%		0.39	%
Return on equity		(1.50	)		3.88			(2.67	)		2.97			3.71
Dividend payout ratio		0.00			76.47			(108.33	)		100.00			79.26
Equity-to-assets ratio		11.04			11.10			10.91			10.74			10.44
Tangible equity ratio ⁽²⁾		10.97			11.02			10.83			10.66			10.36
Net interest margin		2.46			2.66			2.55			2.54			2.69
Average interest-earning assets to average interest-bearing liabilities		116.46			117.01			116.40			115.84			116.94
Efficiency ratio		92.96			82.35			116.97			85.17			84.49
Noninterest expense as a percent of average total assets		2.32			2.21			3.05			2.18			2.29
Book value per common share	$	17.39		$	17.51		$	17.46		$	17.61		$	17.35
Tangible book value per share ⁽²⁾		17.26			17.37			17.32			17.47			17.20

Capital Ratios: ⁽³⁾
Tier 1 leverage ratio		10.86	%		10.91	%		10.41	%		10.18	%		10.25	%
Common equity tier 1 capital ratio		15.43			15.39			14.98			14.90			14.75
Tier 1 capital ratio		15.43			15.39			14.98			14.90			14.75
Total capital ratio		16.68			16.64			16.24			16.15			16.00

Asset Quality Ratios: ⁽⁴⁾
Nonaccrual loans as a percent of total loans		0.07	%		0.41	%		0.02	%		0.02	%		0.02	%
Nonaccrual loans as a percent of total assets		0.06			0.32			0.01			0.01			0.01
ACL as a percent of total loans		1.42			1.29			1.30			1.28			1.29
Net charge-offs to average loans receivable, net		0.00			0.00			0.00			0.00			0.00

Allowance for Credit Losses:
ACL ‒ loans
Beginning balance	$	14,796		$	14,996		$	15,306		$	15,306		$	15,606
Provision (recapture of provision) for credit losses		1,500			(200	)		(300	)		–			(300	)
Charge-offs		(31	)		–			(10	)		–			–
Recoveries		–			–			–			–			–
Ending balance	$	16,265		$	14,796		$	14,996		$	15,306		$	15,306

Allowance for unfunded commitments
Beginning balance	$	564		$	564		$	439		$	439		$	439
Provision for credit losses		75			–			125			–			–
Ending balance	$	639		$	564		$	564		$	439		$	439

Provision (recapture of provision) for credit losses
ACL – loans	$	1,500		$	(200	)	$	(300	)	$	–		$	(300	)
Allowance for unfunded commitments		75			–			125			–			–
Total	$	1,575		$	(200	)	$	(175	)	$	–		$	(300	)

_{⁽¹⁾ Performance ratios are calculated on an annualized basis.}
_{⁽²⁾ Non-GAAP financial measures. Refer to Non-GAAP Financial Measures at the end of this press release for a reconciliation to the nearest GAAP equivalents.}
_{⁽³⁾ Capital ratios are for First Financial Northwest Bank only.}
_{⁽⁴⁾ Loans are reported net of undisbursed funds.}

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES Key Financial Measures (Unaudited)

	At or For the Quarter Ended
	Sep 30,			Jun 30,			Mar 31,			Dec 31,			Sep 30,
		2024			2024			2024			2023			2023
	(Dollars in thousands)
Yields and Costs: ⁽¹⁾
Yield on loans		5.86	%		5.93	%		5.88	%		5.83	%		5.73	%
Yield on investments		4.30			4.38			4.11			4.11			3.98
Yield on interest-earning deposits		5.27			5.25			5.28			5.32			5.18
Yield on FHLB stock		7.73			8.63			7.79			7.29			6.57
Yield on interest-earning assets		5.66	%		5.73	%		5.62	%		5.56	%		5.46	%

Cost of interest-bearing deposits		3.80	%		3.71	%		3.69	%		3.62	%		3.33	%
Cost of borrowings		3.19			2.64			2.65			2.40			2.42
Cost of interest-bearing liabilities		3.72	%		3.59	%		3.58	%		3.50	%		3.24	%

Cost of total deposits ⁽²⁾		3.47	%		3.38	%		3.38	%		3.31	%		3.03	%
Cost of funds ⁽³⁾		3.44	%		3.30	%		3.31	%		3.23	%		2.97	%

Average Balances:
Loans	$	1,131,473		$	1,139,017		$	1,160,156		$	1,167,339		$	1,171,483
Investments		161,232			173,102			202,106			206,837			211,291
Interest-earning deposits		65,149			36,959			37,032			65,680			40,202
FHLB stock		7,719			6,714			6,554			6,584			6,820
Total interest-earning assets	$	1,365,573		$	1,355,792		$	1,405,848		$	1,446,440		$	1,429,796

Interest-bearing deposits	$	1,021,041		$	1,029,608		$	1,082,168		$	1,127,690		$	1,097,324
Borrowings		151,478			129,126			125,604			120,978			125,402
Total interest-bearing liabilities		1,172,519			1,158,734			1,207,772			1,248,668			1,222,726
Noninterest-bearing deposits		96,003			101,196			99,173			102,869			109,384
Total deposits and borrowings	$	1,268,522		$	1,259,930		$	1,306,945		$	1,351,537		$	1,332,110

Average assets	$	1,453,431		$	1,446,207		$	1,495,753		$	1,538,955		$	1,522,224
Average stockholders’ equity		161,569			161,057			161,823			159,659			160,299

_{⁽¹⁾ Yields and costs are annualized.}
_{⁽²⁾ Includes noninterest-bearing deposits.}
_{⁽³⁾ Includes total borrowings and deposits (including noninterest-bearing deposits).}

Non-GAAP Financial Measures

In addition to financial results presented in accordance with generally accepted accounting principles (“GAAP”) utilized in the United States, this earnings release contains non-GAAP financial measures that include tangible equity, tangible assets, tangible book value per share, and the tangible equity-to-assets ratio. The Company believes that these non-GAAP financial measures and ratios as presented are useful for both investors and management to understand the effects of goodwill and core deposit intangible, net and provides an alternative view of the Company’s performance over time and in comparison to the Company’s competitors. Non-GAAP financial measures have limitations, are not required to be uniformly applied and are not audited. They should not be considered in isolation and are not a substitute for other measures in this earnings release that are presented in accordance with GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.

The following tables provide a reconciliation between the GAAP and non-GAAP measures:

	Quarter Ended
		Sep 30, 2024			Jun 30, 2024			Mar 31, 2024			Dec 31, 2023			Sep 30, 2023
	(Dollars in thousands, except per share data)
Tangible equity to tangible assets and tangible book value per share:

Total stockholders’ equity (GAAP)	$	160,213		$	160,693		$	160,183		$	161,660		$	159,235
Less:
Goodwill		889			889			889			889			889
Core deposit intangible, net		326			357			388			419			451
Tangible equity (Non-GAAP)	$	158,998		$	159,447		$	158,906		$	160,352		$	157,895

Total assets (GAAP)	$	1,451,086		$	1,447,753		$	1,468,350		$	1,505,082		$	1,525,568
Less:
Goodwill		889			889			889			889			889
Core deposit intangible, net		326			357			388			419			451
Tangible assets (Non-GAAP)	$	1,449,871		$	1,446,507		$	1,467,073		$	1,503,774		$	1,524,228

Common shares outstanding at period end		9,213,969			9,179,825			9,174,425			9,179,510			9,179,510

Equity-to-assets ratio (GAAP)		11.04	%		11.10	%		10.91	%		10.74	%		10.44	%
Tangible equity-to-tangible assets ratio (Non-GAAP)		10.97			11.02			10.83			10.66			10.36
Book value per common share (GAAP)	$	17.39		$	17.51		$	17.46		$	17.61		$	17.35
Tangible book value per share (Non-GAAP)		17.26			17.37			17.32			17.47			17.20

The MIL Network –

January 25, 2025

MIL-OSI: Federal Home Loan Bank of Indianapolis announces 2024 Board of Directors election results

Source: GlobeNewswire (MIL-OSI)

INDIANAPOLIS, Oct. 29, 2024 (GLOBE NEWSWIRE) — The Federal Home Loan Bank of Indianapolis (“FHLBank Indianapolis” or “Bank”) today announced the results of the election of two Indiana Member Directors and three Independent Directors to its Board of Directors (“Board”). The following individuals were elected to the Board and will each serve four-year terms beginning Jan. 1, 2025.

The new Indiana Member Directors are:

Dan L. Moore, executive chairman, Home Bank, S.B., Martinsville, Ind. Previously, Moore served as its chairman, president and CEO and director. Moore served on the Board from 2011 to 2022 and was Board Chair from 2019 to 2022. He also served as Chairman of the Council of Federal Home Loan Banks in 2022.
Jamie R. Shinabarger, CEO, Springs Valley Bank & Trust Co., Jasper, Ind. Shinabarger also serves on the bank’s board of directors and of SVB&T Corp., the bank’s holding company in French Lick, Ind.

The new Independent Directors are:

Kathryn M. Dominguez, professor of public policy and economics, University of Michigan’s Gerald R. Ford School of Public Policy in Ann Arbor, Mich. She also serves as the school’s Associate Dean for Academic Affairs and is the co-faculty director of the Center on Finance, Law and Policy. Dominguez was appointed to the Board as an Independent Director to fill a partial term in 2023, and currently serves as the Vice Chair of the Risk Oversight Committee.
Charlotte C. Henry, former chief information technology officer for the UAW Retiree Medical Benefits Trust, Detroit. Henry has been an Independent Director on the Board since 2017. She currently serves as the Vice Chair of the Board’s Security and Technology Committee, and formerly served as the Chair of that committee.
Todd E. Sears (Public Interest Independent Director), vice president of development, Cohen Esrey, Indianapolis. Previously, Sears served as chief investment officer and chief financial officer of Valeo Financial Advisors and was executive vice president of research, policy and strategy at Kittle Property Group, Inc., in Indianapolis. Sears previously served as the executive vice president for the non-profit CDFI, Indianapolis Neighborhood Housing Partnership. He has served as an Independent Director on the Board since 2021 and previously served on the Board’s Affordable Housing Advisory Council from 2012-2018.

Annually, the Director of the Federal Housing Finance Agency determines the size of the Board and designates at least a majority, but no more than 60%, of the directorships as member directorships and the remainder as independent directorships. Independent directors are nominated by the Board after consultation with the Bank’s Affordable Housing Advisory Council and the Federal Housing Finance Agency.

Media contact:
Scott Thien, Sr. Communications Lead
317-902-3103
sthien@fhlbi.com

Building Partnerships. Serving Communities
FHLBank Indianapolis is a regional bank in the Federal Home Loan Bank System. FHLBanks are government-sponsored enterprises created by Congress to provide access to low-cost funding for their member financial institutions, with particular attention paid to providing solutions that support the housing and small business needs of members’ customers. FHLBanks are privately capitalized and funded, and they receive no Congressional appropriations. One of 11 independent regional cooperative banks across the U.S., FHLBank Indianapolis is owned by its Indiana and Michigan financial institution members, including commercial banks, credit unions, insurance companies, savings institutions and community development financial institutions. For more information about FHLBank Indianapolis, visit www.fhlbi.com and follow the Bank on LinkedIn, and Instagram and X at @FHLBankIndy.

The MIL Network –

January 25, 2025

MIL-OSI: First Northwest Bancorp Reports Third Quarter 2024 Financial Results

Source: GlobeNewswire (MIL-OSI)

PORT ANGELES, Wash., Oct. 29, 2024 (GLOBE NEWSWIRE) —

CEO Commentary
“This was a quarter of mixed results. Progress on customer deposit gathering and the termination of the FDIC Consent Order was overshadowed by a quarterly loss driven by additional provisions primarily related to certain equity loans made to high net worth, accredited investors.

The teamwork and collaboration between Staff, Management and the Board to address the matters identified in the Consent Order is demonstrative of the qualifications, determination and capabilities of the First Fed team. We appreciate that the FDIC acknowledged the planning, monitoring and execution required to comply with the Order and validation that all of these matters were properly addressed. I am very proud of this accomplishment, and I would like to thank all of the many people within the bank who worked tirelessly to reach this achievement less than one year after the Order was issued.

Through an internal review of our loan portfolio and with consultation with our prudential regulators, it was determined that larger provisions were required in the second quarter of 2024. As a result, we decided it was appropriate to file a restated quarterly report on Form 10-Q for the quarter ended June 30, 2024, and identified a material weakness in the design of certain internal controls. The loans for which we increased reserves were originated between 2020 and 2023. More recent vintages of our loan portfolio are performing well as we have engaged in lending and partnerships that we have evaluated as having a relatively lower risk profile. The provision for credit losses after the amendment was $8.7 million in the second quarter of 2024.

Management and the Board of Directors take the reported material weakness very seriously. We have taken corrective action to address the basis for the restatement and are working to promptly remediate.

We also acknowledge the ongoing lawsuits filed by some of the Water Station equipment borrowers. We intend to vigorously defend against these claims, which we believe are meritless. We also intend to continue pursuing collection of all monies owed by the litigants using all available legal means.

Moving forward, the highly capable bankers at First Fed are focused on continuing to build relationships with small businesses and individuals in the communities we serve. We continue to pursue inroads in SBA, treasury, maritime lending, first and second mortgage lending and community banking. We are introducing products and services to meet our customers where they are and to enhance their overall experience with First Fed. We believe that focusing on these fundamentals of Community Banking will improve our results and our overall franchise value.”

— Matthew P. Deines, President and CEO, First Northwest Bancorp

2024 FINANCIAL RESULTS	3Q 24			2Q 24			3Q 23			2024 YTD			2023 YTD
OPERATING RESULTS (in millions)
Net (loss) income	$	(2.0	)	$	(2.2	)	$	2.5		$	(3.8	)	$	7.8
Pre-provision net interest income		14.0			14.2			15.0			42.2			47.2
Provision for credit losses		3.1			8.7			0.4			12.8			0.2
Noninterest expense		15.8			15.6			14.4			45.8			44.5
Total revenue, net of interest expense *		15.8			21.6			17.9			53.5			54.2
PER SHARE DATA
Basic and diluted (loss) earnings	$	(0.23	)	$	(0.25	)	$	0.28		$	(0.43	)	$	0.87
Book value		17.17			16.81			16.20			17.17			16.20
Tangible book value *		17.00			16.64			16.03			17.00			16.03
BALANCE SHEET (in millions)
Total assets	$	2,255		$	2,216		$	2,154		$	2,255		$	2,154
Total loans		1,735			1,698			1,635			1,735			1,635
Total deposits		1,712			1,708			1,658			1,712			1,658
Total shareholders’ equity		161			159			156			161			156
ASSET QUALITY
Net charge-off ratio⁽¹⁾		0.10	%		1.70	%		0.30	%		0.67	%		0.10	%
Nonperforming assets to total assets		1.35			1.07			0.11			1.35			0.11
Allowance for credit losses on loans
to total loans		1.27			1.14			1.04			1.27			1.04
Nonaccrual loan coverage ratio		72			82			714			72			714
(1) Performance ratios are annualized, where appropriate. ^*See reconciliation of Non-GAAP Financial Measures later in this release.

2024 FINANCIAL RESULTS (Continued)	3Q 24			2Q 24			3Q 23			2024 YTD			2023 YTD
SELECTED RATIOS
Return on average assets⁽¹⁾		-0.36	%		-0.40	%		0.46	%		-0.23	%		0.50	%
Return on average equity⁽¹⁾		-4.91			-5.47			6.17			-3.14			6.50
Return on average tangible common equity^{(1) *}		-4.96			-5.53			6.23			-3.17			6.57
Net interest margin		2.70			2.76			2.97			2.74			3.22
Efficiency ratio		100.31			72.32			80.52			85.54			82.06
Bank common equity tier 1 (CETI) ratio		12.20			12.40			13.43			12.20			13.43
Bank total risk-based capital ratio		13.44			13.49			14.38			13.44			14.38
(1) Performance ratios are annualized, where appropriate. ^*See reconciliation of Non-GAAP Financial Measures later in this release.

	2024 Significant Items as of September 30, 2024
•	Year-to-date net loss of $3.8 million was primarily due to a provision for credit losses of $12.8 million as the collectability of a small number of loan relationships continued to deteriorate and additional reserves were taken on purchased loan pools.
•	First Fed Bank (“First Fed” or the “Bank”) balance sheet restructuring contributed to an improved year-to-date yield on earning assets by 16-basis points over the prior year end to 5.44%.
	– Sale-leaseback transaction completed in the second quarter, resulting in a $7.9 million gain on sale of premises and equipment.
	– Sold $23.2 million of lower-yielding security investments which resulted in $2.1 million year-to-date loss on sale.
	– Purchased $53.3 million of higher-yielding security investments year-to-date.
	– Continued conversion of lower-yielding bank-owned life insurance (“BOLI”) with one conversion completed in the first quarter and an exchange in the third quarter. Two additional policy restructures expected to be completed by the end of the first quarter of 2025.
•	Net interest margin decreased over the prior year end from 3.13% to 2.74%, impacted by the increase in deposit and borrowing costs outpacing increased yields on loans and investments.
•	Loan mix shifted away from construction and commercial real estate into commercial business, auto, multi-family real estate, one-to-four family and home equity compared to the prior year end. The weighted-average rate on new loans year-to-date was 8.5%.
•	Borrowings increased $14.1 million, or 4.4%, to $335.0 million at September 30, 2024, compared to $320.9 million at December 31, 2023.
•	Repurchased 214,132 shares during the first quarter, which closed out the October 2020 Stock Repurchase Plan.
•	Repurchased 98,156 shares during the third quarter under the new share repurchase plan approved in April 2024.
•	Year-to-date deposit growth of $34.7 million, or 2.0%, to $1.71 billion, with a $30.0 million shift from savings to money market accounts. Cost of total deposits increased over the prior year end from 1.66% to 2.49%.
•	Estimated insured deposits totaled $1.3 billion, or 77% of total deposits at September 30, 2024. Available liquidity to uninsured deposit coverage remained strong at 142% at September 30, 2024.
•	Classified loans increased to 2.71% of total loans at September 30, 2024, compared to 2.12% at December 31, 2023.
•	Nonperforming assets increased $11.7 million year-to-date mainly due to three commercial loan relationships included in commercial construction, commercial real estate and commercial business.
•	Completed a reduction-in-force impacting 9% of our workforce on July 24, 2024. This action, along with year-to-date headcount management through attrition, is expected to result in a reduction in current levels of compensation expense by approximately $820,000 per quarter starting in the fourth quarter of 2024.

First Northwest Bancorp (Nasdaq: FNWB) (“First Northwest” or the “Company”) today reported a net loss of $2.0 million for the third quarter of 2024, compared to a net loss of $2.2 million for the second quarter of 2024 and net income of $2.5 million for the third quarter of 2023. Basic and diluted loss per share were $0.23 for the third quarter of 2024, compared to basic and diluted loss per share of $0.25 for the second quarter of 2024 and basic and diluted earnings per share of $0.28 for the third quarter of 2023. In the third quarter of 2024, the Company generated a return on average assets of -0.36%, a return on average equity of -4.91% and a return on average tangible common equity* of -4.96%. Loss before provision for income taxes was $3.2 million for the third quarter of 2024, compared to a loss before provision for income taxes of $2.8 million for the preceding quarter, a decrease of $417,000, or 15.1%, and decreased $6.3 million compared to income of $3.1 million for the third quarter of 2023.

The Bank recorded reserves on individually analyzed loans totaling $1.9 million due to the uncertain future cash flows from specific loan relationships in the third quarter of 2024. An additional credit loss on loans of $1.8 million was attributable to an increase in the reserve on pooled commercial business loans, with a reserve loss rate of 3.4% applied to that segment of the loan portfolio at period end. We believe the reserve on individually analyzed loans does not represent a universal decline in the collectability of all loans in the portfolio. We continue to work on resolution plans for all troubled borrowers. The provision for credit losses on loans had a significant negative impact on net income and was the only reason for the net loss recorded for the third quarter of 2024.

Steps taken to restructure the Bank’s balance sheet continue to have a positive impact. The fair value hedge on loans, tied to the compounded overnight index swap using the secured overnight financing rate index, established in the first quarter of 2024 added $946,000 to interest income year-to-date. The fair value hedge on loans reduces interest rate risk by reducing liability sensitivity while increasing interest income. We estimate that if rates remain unchanged, this hedge will add $1.3 million of annualized interest income in 2024. The estimated impact will be reduced if the Federal Reserve Board (“FRB”) implements additional rate cuts during the year. The Bank expects to maintain a positive carry on its derivative for up to 75-basis points of additional rate cuts.

The balance sheet restructure plan also includes the conversion of BOLI policies in order to reinvest in higher yielding products. The first $6.1 million policy earning 2.58% was surrendered during the first quarter and reinvested into a policy earning 5.18%. In the third quarter of 2024, a $1.3 million policy earning 3.18% was exchanged and reinvested into a policy earning 5.73%. The remaining surrender and exchange transactions are expected to be completed by the end of the first quarter of 2025.

Net Interest Income
Total interest income decreased $405,000 to $28.2 million for the third quarter of 2024, compared to $28.6 million in the previous quarter, and increased $2.4 million compared to $25.8 million in the third quarter of 2023. Interest income decreased in the third quarter of 2024 primarily due to interest reversals for loans placed on nonaccrual totaling $619,000. The interest adjustments were partially offset by higher yields on performing loans combined with increased loan volume. Interest and fees on loans increased year-over-year as the loan portfolio grew as a result of draws on new and existing lines of credit, originations of commercial real estate, commercial business and home equity loans, and auto and manufactured home loan purchases. Loan yields increased over the prior year due to higher rates on new originations as well as the repricing of variable and adjustable-rate loans tied to the Prime Rate or other indices.

Total interest expense decreased $190,000 to $14.2 million for the third quarter of 2024, compared to $14.4 million in the second quarter of 2024, and increased $3.3 million compared to $10.9 million in the third quarter of 2023. Interest expense for the three months ended September 30, 2024, was lower primarily due to lower rates on advances combined with decreased advance volumes. The decrease was partially offset by a 9-basis point increase in the cost of deposits to 2.56% for the quarter ended September 30, 2024, from 2.47% for the prior quarter as a result of customers continuing to shift deposit balances into higher earning products. The increase over the third quarter of 2023 was the result of a 71-basis point increase in the cost of deposits from 1.85% in the third quarter one year ago. A shift in the deposit mix from transaction and savings accounts to money market accounts and time deposits also added to the higher cost of deposits compared to the third quarter of 2023. Higher costs of brokered time deposits also contributed to additional deposit costs with a 57-basis point increase to 4.88% for the current quarter compared to 4.31% for the third quarter one year ago.

Net interest income before provision for credit losses for the third quarter of 2024 decreased $215,000, or 1.5%, to $14.0 million, compared to $14.2 million for the preceding quarter, and decreased $930,000, or 6.2%, from the third quarter one year ago. The impact of the September FRB rate cut will be reflected beginning with fourth quarter 2024 interest income and expenses.

The Company recorded a $3.1 million provision for credit losses on loans in the third quarter of 2024, primarily due to reserves taken individually analyzed loans and Current Expected Credit Loss model loss factor increases attributable to pooled commercial business and multi-family loans at quarter end. Credit loss provision increases were offset by decreases to the loss factors applied to consumer, commercial real estate and one-to-four family loans. Higher loss factors applied to unfunded commitments and a moderate increase in commitment balances also resulted in a provision for credit losses on unfunded commitments of $57,000 for the quarter. The total provision for credit loss recorded for the third quarter of 2024 was $3.1 million, compared to a credit loss provision of $8.7 million for the preceding quarter and a provision of $371,000 for the third quarter of 2023.

The net interest margin decreased to 2.70% for the third quarter of 2024, from 2.76% for the prior quarter, and decreased 27-basis points from 2.97% for the third quarter of 2023. The decrease over the linked quarter is primarily due to the accrued interest reversed on three nonperforming commercial loans during the three months ended September 30, 2024, partially offset by an increase in interest income earned on a higher volume of loans. Investment securities also had decreased volume due to regular payments and lower yields due to variable-rate securities compared to the preceding quarter. The Company reported reduced rates and declining volume of borrowings during the quarter which lowered costs; however, these savings were partially offset by an increase in cost due to a higher volume of retail customer deposits. The decrease in net interest margin from the same quarter one year ago is due to higher funding costs for deposits and borrowed funds. Organic loan production comprised 73% of new loan commitments for the third quarter with the remaining 27% added through purchases of higher-yielding loans from established third-party relationships. The Bank’s fair value hedging agreements on securities and loans added $188,000 and $395,000, respectively, to interest income for the third quarter of 2024.

The yield on average earning assets for the third quarter of 2024 decreased 11-basis points to 5.44% compared to 5.55% for the second quarter of 2024 and increased 30-basis points from 5.14% for the third quarter of 2023. The third quarter decrease is attributable to the accrued interest reversed on nonperforming loans, a lower yield and volume of investment securities and a decrease in the balance of Federal Home Loan Bank (“FHLB”) stock. The year-over-year increase in interest income was primarily due to higher average loan balances augmented by increases in yields on all earning assets, which were positively impacted by the higher rate environment.

The cost of average interest-bearing liabilities decreased 5-basis points to 3.23% for the third quarter of 2024, compared to 3.28% for the second quarter of 2024, and increased 63-basis points from 2.60% for the third quarter of 2023. Total cost of funds decreased to 2.82% for the third quarter of 2024 from 2.87% in the prior quarter and increased from 2.23% for the third quarter of 2023. Current quarter decreases were due to lower average balances and costs on borrowings. The Bank continues to offer higher rate specials on money market and CD accounts to attract and retain retail customer deposits. The average brokered CD balance decreased $5.5 million from the linked quarter with a 6-basis point decrease in the average rate paid on brokered funds.

The increase in cost of average interest-bearing liabilities over the same quarter last year was driven by higher rates paid on deposits and borrowings and higher average CD balances. The Company attracted and retained funding through the use of promotional products and a focus on digital account acquisition. The mix of retail deposit balances shifted from no or low-cost transaction and savings accounts towards higher cost term certificate and higher yield money market accounts. Retail CDs represented 29.3%, 26.8% and 27.6% of retail deposits at September 30, 2024, June 30, 2024 and September 30, 2023, respectively. Average interest-bearing deposit balances increased $44.8 million, or 3.2%, to $1.45 billion for the third quarter of 2024 compared to the second quarter of 2024 and increased $75.0 million, or 5.4%, compared to $1.38 billion for the third quarter of 2023.

Selected Yields	3Q 24			2Q 24			1Q 24			4Q 23			3Q 23
Loan yield		5.51	%		5.62	%		5.51	%		5.38	%		5.31	%
Investment securities yield		4.90			5.01			4.75			4.53			4.18
Cost of interest-bearing deposits		3.00			2.91			2.86			2.52			2.22
Cost of total deposits		2.56			2.47			2.43			2.12			1.85
Cost of borrowed funds		4.35			4.76			4.52			4.50			4.45
Net interest spread		2.21			2.27			2.28			2.40			2.54
Net interest margin		2.70			2.76			2.76			2.84			2.97

Noninterest Income
Noninterest income decreased to $1.8 million for the third quarter of 2024 compared to $7.4 million for the second quarter of 2024. Nonrecurring second quarter transactions included a sale-leaseback transaction which resulted in a gain on sale of premises and equipment of $7.9 million, partially offset by a $2.1 million loss on the sale of lower-yielding available-for-sale securities. Income from the gain on sale of loans in the third quarter of 2024 includes $51,000 from SBA loans, compared to $116,000 in the prior quarter. Write-downs on sold loan servicing rights mark-to-market valuation totaled $161,000 for the third quarter of 2024 compared to $103,000 in the prior quarter. Other noninterest income includes a valuation gain on partnership investments of $279,000 compared to a loss of $56,000 in the preceding quarter.

Noninterest income decreased 38.7% from $2.9 million in the same quarter one year ago. The third quarter of 2023 included $750,000 in credit enhancements reimbursed to the Company on Splash charge-offs recorded in other noninterest income. The quarter ended September 30, 2023, also included a $102,000 gain on sale of mortgage loans, compared to a $6,000 gain in the third quarter of 2024.

Noninterest Income
$ in thousands	3Q 24		2Q 24			1Q 24		4Q 23			3Q 23
Loan and deposit service fees	$	1,059	$	1,076		$	1,102		1,068		$	1,068
Sold loan servicing fees and servicing rights mark-to-market		10		74			219		276			98
Net gain on sale of loans		58		150			52		33			171
Net (loss) gain on sale of investment securities		—		(2,117	)		—		(5,397	)		—
Net gain on sale of premises and equipment		—		7,919			—		—			—
Increase in cash surrender value of bank-owned life insurance		315		293			243		260			252
Other income		337		(48	)		572		831			1,315
Total noninterest income	$	1,779	$	7,347		$	2,188	$	(2,929	)	$	2,904

Noninterest Expense
Noninterest expense totaled $15.9 million for the third quarter of 2024, compared to $15.6 million for the preceding quarter and $14.4 million for the third quarter a year ago. Increases were primarily due to one-time severance payouts of $704,000 during the three months ended September 30, 2024, partially offset by a decrease in occupancy due to the one-time tax assessment on the sale-leaseback of $359,000 paid in the previous quarter. Other expense increased this quarter primarily due to $161,000 of additional credit related expenses.

The increase in total noninterest expenses compared to the third quarter of 2023 is mainly due to current quarter one-time severance payouts of $704,000, additional payroll tax expense of $342,000 and additional medical benefit expense of $162,000. Payroll tax expense in the third quarter of 2023 included accretion of the employee retention credit (“ERC”) which reduced the expense by $293,000. In the fourth quarter of 2023, the Bank stopped the recognition of the ERC for the foreseeable future. Occupancy increased due to the additional rent of $416,000 from the previous quarter sale-leaseback transaction. Other increases compared to the third quarter of 2023 included $51,000 in stockholder communications, $103,000 of state taxes, $163,000 in FDIC insurance premiums, and $269,000 of additional credit related expenses. These increases were partially offset by lower legal fees of $204,000, consulting fees of $146,000 and advertising costs of $91,000. The Company continues to focus on controlling compensation expense and reducing advertising and other discretionary spending to improve earnings.

Noninterest Expense
$ in thousands	3Q 24			2Q 24			1Q 24			4Q 23			3Q 23
Compensation and benefits	$	8,582		$	8,588		$	8,128		$	7,397		$	7,795
Data processing		2,085			2,008			1,944			2,107			1,945
Occupancy and equipment		1,553			1,799			1,240			1,262			1,173
Supplies, postage, and telephone		360			317			293			351			292
Regulatory assessments and state taxes		548			457			513			376			446
Advertising		409			377			309			235			501
Professional fees		698			684			910			1,119			929
FDIC insurance premium		533			473			386			418			369
Other expense		1,080			906			580			3,725			926
Total noninterest expense	$	15,848		$	15,609		$	14,303		$	16,990		$	14,376

Efficiency ratio		100.31	%		72.32	%		88.75	%		150.81	%		80.52	%

Investment Securities
Investment securities increased $4.2 million, or 1.4%, to $310.9 million at September 30, 2024, compared to $306.7 million three months earlier, and increased $1.5 million compared to $309.3 million at September 30, 2023. The market value of the portfolio increased $8.1 million during the third quarter of 2024 primarily due to the market rally in the second half the third quarter which drove the yield curve lower. At September 30, 2024, municipal bonds totaled $81.4 million and comprised the largest portion of the investment portfolio at 26.2%. Agency issued mortgage-backed securities (“MBS agency”) were the second largest segment, totaling $78.5 million, or 25.3%, of the portfolio at quarter end. Included in MBS non-agency were $29.6 million of commercial mortgage-backed securities (“CMBS”), of which 89.8% were in “A” tranches and the remaining 10.2% were in “B” tranches. Our largest exposure in the CMBS portfolio at September 30, 2024, was to long-term care facilities, which comprised 65.0%, or $19.2 million, of our private label CMBS securities. All of the CMBS bonds had credit enhancements ranging from 28.8% to 71.8%, with a weighted-average credit enhancement of 55.3%, that further reduced the risk of loss on these investments.

The estimated average life of the securities portfolio was approximately 7.4 years at September 30, 2024, 7.8 years at the prior quarter end and 7.7 years for the third quarter of 2023. The effective duration of the portfolio was approximately 3.9 years at September 30, 2024, compared to 4.3 years in the prior quarter and 4.9 years at the end of the third quarter of 2023. Our recent investment purchases have primarily been floating rate securities to take advantage of higher short-term rates above those offered on cash and to reduce our liability sensitivity.

Investment Securities Available for Sale, at Fair Value
$ in thousands	3Q 24		2Q 24		1Q 24		4Q 23		3Q 23
Municipal bonds	$	81,363	$	78,825	$	87,004	$	87,761	$	93,995
U.S. Treasury notes		—		—		—		—		2,377
International agency issued bonds (Agency bonds)		—		—		—		—		1,703
U.S. government agency issued asset-backed securities (ABS agency)		13,296		13,982		14,822		11,782		—
Corporate issued asset-backed securities (ABS corporate)		16,391		16,483		13,929		5,286		—
Corporate issued debt securities (Corporate debt):
Senior positions		10,241		9,066		13,617		9,270		16,975
Subordinated bank notes		43,817		43,826		39,414		42,184		37,360
U.S. Small Business Administration securities (SBA)		9,317		9,772		7,911		—		—
Mortgage-backed securities:
U.S. government agency issued mortgage-backed securities (MBS agency)		78,549		77,301		83,271		63,247		66,946
Non-agency issued mortgage-backed securities (MBS non-agency)		57,886		57,459		65,987		76,093		89,968
Total securities available for sale, at fair value	$	310,860	$	306,714	$	325,955	$	295,623	$	309,324

Loans and Unfunded Loan Commitments
Net loans, excluding loans held for sale, increased $36.7 million, or 2.2%, to $1.71 billion at September 30, 2024, from $1.68 billion at June 30, 2024, and increased $96.4 million, or 6.0%, from $1.62 billion one year ago.

Commercial business loans increased $38.2 million, primarily attributable to a $29.0 million increase in our Northpointe Bank Mortgage Purchase Program participation, organic originations totaling $7.9 million and draws on existing lines of credit of $5.7 million which were partially offset by payments. One-to-four family loans increased $5.9 million during the third quarter of 2024 as a result of $14.2 million in residential construction loans that converted to permanent amortizing loans, partially offset by payoffs and scheduled payments. Home equity loans increased $4.3 million over the previous quarter due to organic home equity loan production of $5.5 million and draws on new and existing commitments of $4.6 million, partially offset by payoffs and scheduled payments. Multi-family loans increased $3.7 million during the current quarter. The increase was primarily the result of $9.2 million of construction loans converting into permanent amortizing loans, partially offset by payoffs and scheduled payments. Commercial real estate loans increased $497,000 during the third quarter of 2024 compared to the previous quarter as originations of $8.6 million were offset by payoffs and scheduled payments.

Construction loans decreased $11.6 million during the quarter, with $23.4 million converting into fully amortizing loans, partially offset by draws on new and existing loans. New single-family residence construction loan commitments totaled $4.1 million in the third quarter, compared to $2.7 million in the preceding quarter. Auto and other consumer loans decreased $4.4 million during the third quarter of 2024 as payoffs and scheduled payments were higher than $5.8 million of new auto loan purchases, a $4.3 million manufactured home loan pool and individual manufactured home loan purchases totaling $1.2 million.

The Company originated $3.4 million in residential mortgages during the third quarter of 2023 and sold $3.9 million, with an average gross margin on sale of mortgage loans of approximately 2.06%. This production compares to residential mortgage originations of $5.0 million in the preceding quarter with sales of $4.9 million, and an average gross margin of 2.05%. Single-family home inventory remained historically low and higher market rates on mortgage loans continued to limit saleable mortgage loan production through much of the third quarter.

Loans by Collateral and Unfunded Commitments
$ in thousands	3Q 24		2Q 24		1Q 24		4Q 23		3Q 23
One-to-four family construction	$	51,607	$	49,440	$	70,100	$	60,211	$	72,991
All other construction and land		45,166		58,346		55,286		69,484		71,092
One-to-four family first mortgage		469,053		434,840		436,543		426,159		409,207
One-to-four family junior liens		14,701		13,706		12,608		12,250		12,859
One-to-four family revolving open-end		48,459		44,803		45,536		42,479		38,413
Commercial real estate, owner occupied:
Health care		29,407		29,678		29,946		22,523		22,677
Office		17,901		19,215		17,951		18,468		18,599
Warehouse		11,645		14,613		14,683		14,758		14,890
Other		64,535		56,292		55,063		61,304		57,414
Commercial real estate, non-owner occupied:
Office		49,770		50,158		53,099		53,548		53,879
Retail		49,717		50,101		50,478		51,384		51,466
Hospitality		62,282		62,628		66,982		67,332		61,339
Other		82,573		84,428		93,040		94,822		96,083
Multi-family residential		354,118		350,382		339,907		333,428		325,338
Commercial business loans		86,904		79,055		90,781		76,920		75,068
Commercial agriculture and fishing loans		15,369		14,411		10,200		5,422		4,437
State and political subdivision obligations		404		405		405		405		439
Consumer automobile loans		144,036		151,121		139,524		132,877		134,695
Consumer loans secured by other assets		132,749		129,293		122,895		108,542		104,999
Consumer loans unsecured		4,411		5,209		6,415		7,712		9,093
Total loans	$	1,734,807	$	1,698,124	$	1,711,442	$	1,660,028	$	1,634,978

Unfunded commitments under lines of credit or existing loans	$	166,446	$	155,005	$	148,736	$	149,631	$	154,722

Deposits
Total deposits increased $3.4 million to $1.71 billion at September 30, 2024, compared to $1.71 billion at June 30, 2024, and increased $53.9 million, or 3.3%, compared to $1.66 billion one year ago. During the third quarter of 2024, total retail customer deposit balances increased $23.4 million and brokered deposit balances decreased $20.0 million. Compared to the preceding quarter, there were balance increases of $18.1 million in consumer time deposits, $17.7 million in business money market accounts, $7.9 million in consumer demand accounts and $7.7 million in business time deposits. These increases were partially offset by decreases in business demand accounts of $26.4 million, brokered time deposits of $20.0 million, consumer money market accounts of $7.4 million, business savings accounts of $6.5 million, consumer savings accounts of $5.3 million and public fund time deposits of $941,000, during the third quarter of 2024. Increases in time deposits and money market accounts were driven by customer behavior as they sought out higher rates. Overall, the current rate environment continues to contribute to greater competition for deposits with ongoing deposit rate specials offered to attract new funds.

The Company estimates that $401.0 million, or 23%, of total deposit balances were uninsured at September 30, 2024. Approximately $265.7 million, or 16%, of total deposits were uninsured business and consumer deposits with the remaining $135.3 million, or 8%, consisting of uninsured public funds at September 30, 2024. Uninsured public fund balances were fully collateralized. The Bank holds an FHLB standby letter of credit as part of our participation in the Washington Public Deposit Protection Commission program which covered $115.5 million of related deposit balances while the remaining $19.8 million of uninsured tribal accounts was fully covered through pledged securities at September 30, 2024.

As of September 30, 2024, consumer deposits made up 58% of total deposits with an average balance of $24,000 per account, business deposits made up 22% of total deposits with an average balance of $51,000 per account, public fund deposits made up 8% of total deposits with an average balance of $1.6 million per account and the remaining 12% of account balances are brokered time deposits. We have maintained the majority of our public fund relationships for over 10 years. Approximately 70% of our customer base is located in rural areas, with 18% in urban areas and the remaining 12% are brokered deposits as of September 30, 2024.

Deposits
$ in thousands	3Q 24			2Q 24			1Q 24			4Q 23			3Q 23
Noninterest-bearing demand deposits	$	252,999		$	276,543		$	252,083		$	269,800		$	280,475
Interest-bearing demand deposits		167,202			162,201			169,418			182,361			179,029
Money market accounts		433,307			423,047			362,205			372,706			374,269
Savings accounts		212,763			224,631			242,148			253,182			260,279
Certificates of deposit, retail		441,665			398,161			443,412			410,136			379,484
Total retail deposits		1,507,936			1,484,583			1,469,266			1,488,185			1,473,536
Certificates of deposit, brokered		203,705			223,705			207,626			169,577			179,586
Total deposits	$	1,711,641		$	1,708,288		$	1,676,892		$	1,657,762		$	1,653,122

Public fund and tribal deposits included in total deposits	$	139,729		$	138,439		$	132,652		$	128,627		$	130,974
Total loans to total deposits		101	%		99	%		102	%		100	%		99	%

Deposit Mix	3Q 24			2Q 24			1Q 24			4Q 23			3Q 23
Noninterest-bearing demand deposits		14.8	%		16.2	%		15.0	%		16.3	%		17.0	%
Interest-bearing demand deposits		9.8			9.5			10.1			11.0			10.8
Money market accounts		25.3			24.8			21.6			22.5			22.6
Savings accounts		12.4			13.1			14.4			15.3			15.7
Certificates of deposit, retail		25.8			23.3			26.5			24.7			23.0
Certificates of deposit, brokered		11.9			13.1			12.4			10.2			10.9

Cost of Deposits for the Quarter Ended	3Q 24			2Q 24			1Q 24			4Q 23			3Q 23
Interest-bearing demand deposits		0.45	%		0.47	%		0.45	%		0.45	%		0.46	%
Money market accounts		2.65			2.40			2.08			1.48			1.22
Savings accounts		1.64			1.62			1.63			1.54			1.42
Certificates of deposit, retail		4.16			4.10			4.13			3.92			3.52
Certificates of deposit, brokered		4.88			4.94			4.94			4.72			4.31
Cost of total deposits		2.56			2.47			2.43			2.12			1.85

Asset Quality
The allowance for credit losses on loans (“ACLL”) increased $2.6 million from $19.3 million at June 30, 2024, to $22.0 million at September 30, 2024. The ACLL as a percentage of total loans was 1.27% at September 30, 2024, increasing from 1.14% at June 30, 2024, and increasing from 1.04% one year earlier. The current quarter increase can be attributed to $1.9 million of additional reserves taken on individually evaluated commercial business loans due uncertainty in the collectability of these loans. The pooled loan reserve increased $1.2 million due to higher loss factors applied to commercial business and multi-family loans, partially offset by lower loss factors applied to one-to-four family, commercial real estate, home equity, auto and other consumer loans. Loss factors were revised based on the results of an annual loss driver analysis, in conjunction with other relevant factors, to update each segment’s sensitivity to qualitative factors used in the calculation of the pooled reserve at September 30, 2024.

Nonperforming loans totaled $30.4 million at September 30, 2024, an increase of $6.8 million from June 30, 2024, primarily attributable to a $5.6 million delinquent commercial real estate relationship and two commercial business loans with an aggregate total of $1.7 million placed on nonaccrual due to credit concerns. The percentage of the allowance for credit losses on loans to nonperforming loans decreased to 72% at September 30, 2024, from 82% at June 30, 2024, and from 714% at September 30, 2023. This ratio continues to decline as higher balances of real estate loans are included in nonperforming assets with no significant corresponding increase to the ACLL as these secured loans are considered adequately reserved for based on information currently available.

Classified loans increased $7.2 million to $46.9 million at September 30, 2024, due to the downgrade of one $6.4 million commercial real estate loan and ten commercial business loans totaling $5.6 million during the third quarter, partially offset by loan payoffs totaling $5.0 million. An $11.2 million construction loan relationship, which became a classified loan in the fourth quarter of 2022; an $8.1 million commercial construction loan relationship, which became classified in the previous quarter; and a $6.2 million commercial loan relationship, which became classified in the fourth quarter of 2023, account for 55% of the classified loan balance at September 30, 2024. 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 two of these three collateral dependent relationships. The Bank is also closely monitoring certain equity program loans, with 14 loans totaling $5.9 million included in classified loans at September 30, 2024, and an additional nine loans totaling $3.1 million included in the special mention risk grading category.

$ in thousands	3Q 24			2Q 24			1Q 24			4Q 23			3Q 23
Allowance for credit losses on loans to total loans		1.27	%		1.14	%		1.05	%		1.05	%		1.04	%
Allowance for credit losses on loans to nonaccrual loans		72			82			92			94			714
Nonaccrual loans to total loans		1.75			1.39			1.14			1.12			0.15
Net charge-off ratio (annualized)		0.10			1.70			0.19			0.14			0.30

Total nonaccrual loans	$	30,376		$	23,631		$	19,481		$	18,644		$	2,374
Reserve for unfunded commitments	$	704		$	647		$	548		$	817		$	828

Capital
Total shareholders’ equity increased to $160.8 million at September 30, 2024, compared to $158.9 million three months earlier, due to an increase in the after-tax fair market values of the available-for-sale investment securities portfolio of $6.3 million, partially offset by a net loss of $2.0 million, a decrease in the after-tax fair market values of derivatives of $1.2 million, share repurchases totaling $1.0 million and dividends declared of $659,000.

Book value per common share was $17.17 at September 30, 2024, compared to $16.81 at June 30, 2024, and $16.20 at September 30, 2023. Tangible book value per common share* was $17.00 at September 30, 2024, compared to $16.64 at June 30, 2024, and $16.03 at September 30, 2023.

Capital levels for both the Company and its operating bank, First Fed, remain in excess of applicable regulatory requirements and the Bank was categorized as “well-capitalized” at September 30, 2024. Common Equity Tier 1 and Total Risk-Based Capital Ratios at September 30, 2024, were 12.2% and 13.4%, respectively.

	3Q 24			2Q 24			1Q 24			4Q 23			3Q 23
Equity to total assets		7.13	%		7.17	%		7.17	%		7.42	%		7.25	%
Tangible common equity to tangible assets *		7.06			7.10			7.10			7.35			7.17
Capital ratios (First Fed Bank):
Tier 1 leverage		9.39			9.38			9.74			9.90			10.12
Common equity Tier 1 capital		12.20			12.40			12.56			13.12			13.43
Tier 1 risk-based		12.20			12.40			12.56			13.12			13.43
Total risk-based		13.44			13.49			13.57			14.11			14.38

Share Repurchase Program and Cash Dividend
First Northwest continued to return capital to our shareholders through cash dividends and share repurchases during the third quarter of 2024. We repurchased 98,156 shares of common stock under the Company’s April 2024 Stock Repurchase Plan (“Repurchase Plan”) at an average price of $10.19 per share for a total of $1.0 million during the quarter ended September 30, 2024, leaving 846,123 shares remaining under the plan. In addition, the Company paid cash dividends totaling $652,000 in the third quarter of 2024.

^{____________________
*} See reconciliation of Non-GAAP Financial Measures later in this release.

Awards/Recognition
The Company received several accolades as a leader in the community in the last year.

	In September 2024, the First Fed team was recognized in the 2024 Best of Olympic Peninsula surveys, winning Best Bank and Best Lender in Clallam County; Best Bank and Best Financial Advisor in the West End; and Best Lender in Jefferson County. First Fed was also a finalist for Best Bank, Best Customer Service, Best Employer and Best Financial Advisor in Jefferson County; Best Customer Service, Best Employer and Best Financial Advisor in Clallam County; and Best Customer Service and Best Employer in the West End.
	In May 2024, First Fed, along with the First Fed Community Foundation, were honored to be ranked second on the Puget Sound Business Journal Midsize Corporate Philanthropists list.
	In October 2023, the First Fed team was honored to bring home the Gold for Best Bank in the Best of the Northwest survey hosted by Bellingham Alive for the second year in a row.
	In September 2023, the First Fed team was recognized in the 2023 Best of Olympic Peninsula surveys as a finalist for Best Employer in Kitsap County and Best Bank and Best Financial Institution in Bainbridge.

About the Company
First Northwest Bancorp (Nasdaq: FNWB) is a financial holding company engaged in investment activities including the business of its subsidiary, First Fed Bank. First Fed is a Pacific Northwest-based financial institution which has served its customers and communities since 1923. Currently First Fed has 16 locations in Washington state including 12 full-service branches. First Fed’s business and operating strategy is focused on building sustainable earnings by delivering a full array of financial products and services for individuals, small businesses, non-profit organizations and commercial customers. In 2022, First Northwest made an investment in The Meriwether Group, LLC, a boutique investment banking and accelerator firm. Additionally, First Northwest focuses on strategic partnerships to provide modern financial services such as digital payments and marketplace lending. First Northwest Bancorp was incorporated in 2012 and completed its initial public offering in 2015 under the ticker symbol FNWB. The Company is headquartered in Port Angeles, Washington.

Forward-Looking Statements
Certain matters discussed in this press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to, among other things, expectations of the business environment in which we operate, projections of future performance, perceived opportunities in the market, potential future credit experience, including our ability to collect, the outcome of litigation and statements regarding our mission and vision, and include, but are not limited to, statements about our plans, objectives, expectations and intentions that are not historical facts, and other statements often identified by words such as “believes,” “expects,” “anticipates,” “estimates,” or similar expressions. These forward-looking statements are based upon current management beliefs and expectations and may, therefore, involve risks and uncertainties, many of which are beyond our control. Our actual results, performance, or achievements may differ materially from those suggested, expressed, or implied by forward-looking statements as a result of a wide variety of factors including, but not limited to: increased competitive pressures; changes in the interest rate environment; the credit risks of lending activities; pressures on liquidity, including as a result of withdrawals of deposits or declines in the value of our investment portfolio; changes in general economic conditions and conditions within the securities markets; legislative and regulatory changes; the risk of inaccuracies in the reporting of our financial condition as a result of the material weakness in our internal controls; and other factors described in the Company’s latest Annual Report on Form 10-K under the section entitled “Risk Factors,” and other filings with the Securities and Exchange Commission (“SEC”),which are available on our website at www.ourfirstfed.com and on the SEC’s website at www.sec.gov.

Any of the forward-looking statements that we make in this press release and in the other public statements we make may turn out to be incorrect because of the inaccurate assumptions we might make, because of the factors illustrated above or because of other factors that we cannot foresee. Because of these and other uncertainties, our actual future results may be materially different from those expressed or implied in any forward-looking statements made by or on our behalf and the Company’s operating and stock price performance may be negatively affected. Therefore, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for 2024 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us and could negatively affect the Company’s operations and stock price performance.

For More Information Contact:
Matthew P. Deines, President and Chief Executive Officer
Geri Bullard, EVP, Chief Financial Officer and Chief Operating Officer
IRGroup@ourfirstfed.com
360-457-0461

FIRST NORTHWEST BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data) (Unaudited)

	September 30, 2024			June 30, 2024			September 30, 2023			Three Month Change			One Year Change
ASSETS
Cash and due from banks	$	17,953		$	19,184		$	20,609			-6.4	%		-12.9	%
Interest-earning deposits in banks		64,769			63,995			63,277			1.2			2.4
Investment securities available for sale, at fair value		310,860			306,714			309,324			1.4			0.5
Loans held for sale		378			1,086			689			-65.2			-45.1
Loans receivable (net of allowance for credit losses on loans $21,970, $19,343, and $16,945)		1,714,416			1,677,764			1,618,033			2.2			6.0
Federal Home Loan Bank (FHLB) stock, at cost		14,435			13,086			12,621			10.3			14.4
Accrued interest receivable		8,939			9,466			8,093			-5.6			10.5
Premises and equipment, net		10,436			10,714			17,954			-2.6			-41.9
Servicing rights on sold loans, at fair value		3,584			3,740			3,729			-4.2			-3.9
Bank-owned life insurance, net		41,429			41,113			40,318			0.8			2.8
Equity and partnership investments		14,912			15,085			14,623			-1.1			2.0
Goodwill and other intangible assets, net		1,083			1,084			1,087			-0.1			-0.4
Deferred tax asset, net		10,802			12,216			16,611			-11.6			-35.0
Prepaid expenses and other assets		41,490			40,715			26,577			1.9			56.1
Total assets	$	2,255,486		$	2,215,962		$	2,153,545			1.8	%		4.7	%

LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits	$	1,711,641		$	1,708,288		$	1,657,762			0.2	%		3.3	%
Borrowings		334,994			302,575			300,416			10.7			11.5
Accrued interest payable		2,153			3,143			2,276			-31.5			-5.4
Accrued expenses and other liabilities		43,424			41,771			34,651			4.0			25.3
Advances from borrowers for taxes and insurance		2,485			1,304			2,375			90.6			4.6
Total liabilities		2,094,697			2,057,081			1,997,480			1.8			4.9

Shareholders’ Equity
Preferred stock, $0.01 par value, authorized 5,000,000 shares, no shares issued or outstanding		—			—			—			n/a			n/a
Common stock, $0.01 par value, authorized 75,000,000 shares; issued and outstanding 9,365,979 at September 30, 2024; issued and outstanding 9,453,247 at June 30, 2024; and issued and outstanding 9,630,735 at September 30, 2023		94			94			96			0.0			-2.1
Additional paid-in capital		93,218			93,985			95,658			-0.8			-2.6
Retained earnings		100,660			103,322			113,579			-2.6			-11.4
Accumulated other comprehensive loss, net of tax		(26,424	)		(31,597	)		(45,850	)		16.4			42.4
Unearned employee stock ownership plan (ESOP) shares		(6,759	)		(6,923	)		(7,418	)		2.4			8.9
Total shareholders’ equity		160,789			158,881			156,065			1.2			3.0
Total liabilities and shareholders’ equity	$	2,255,486		$	2,215,962		$	2,153,545			1.8	%		4.7	%

FIRST NORTHWEST BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data) (Unaudited)

	Quarter Ended
	September 30, 2024			June 30, 2024			September 30, 2023			Three Month Change			One Year Change
INTEREST INCOME
Interest and fees on loans receivable	$	23,536		$	23,733		$	21,728			-0.8	%		8.3	%
Interest on investment securities		3,786			3,949			3,368			-4.1			12.4
Interest on deposits in banks		582			571			524			1.9			11.1
FHLB dividends		302			358			214			-15.6			41.1
Total interest income		28,206			28,611			25,834			-1.4			9.2
INTEREST EXPENSE
Deposits		10,960			10,180			7,699			7.7			42.4
Borrowings		3,226			4,196			3,185			-23.1			1.3
Total interest expense		14,186			14,376			10,884			-1.3			30.3
Net interest income		14,020			14,235			14,950			-1.5			-6.2
PROVISION FOR CREDIT LOSSES
Provision for credit losses on loans		3,077			8,640			880			-64.4			249.7
Provision for (recapture of) credit losses on unfunded commitments		57			99			(509	)		-42.4			111.2
Provision for credit losses		3,134			8,739			371			-64.1			744.7
Net interest income after provision for credit losses		10,886			5,496			14,579			98.1			-25.3
NONINTEREST INCOME
Loan and deposit service fees		1,059			1,076			1,068			-1.6			-0.8
Sold loan servicing fees and servicing rights mark-to-market		10			74			98			-86.5			-89.8
Net gain on sale of loans		58			150			171			-61.3			-66.1
Net loss on sale of investment securities		—			(2,117	)		—			100.0			n/a
Net gain on sale of premises and equipment		—			7,919			—			-100.0			n/a
Increase in cash surrender value of bank-owned life insurance		315			293			252			7.5			25.0
Other income		337			(48	)		1,315			802.1			-74.4
Total noninterest income		1,779			7,347			2,904			-75.8			-38.7
NONINTEREST EXPENSE
Compensation and benefits		8,582			8,588			7,795			-0.1			10.1
Data processing		2,085			2,008			1,945			3.8			7.2
Occupancy and equipment		1,553			1,799			1,173			-13.7			32.4
Supplies, postage, and telephone		360			317			292			13.6			23.3
Regulatory assessments and state taxes		548			457			446			19.9			22.9
Advertising		409			377			501			8.5			-18.4
Professional fees		698			684			929			2.0			-24.9
FDIC insurance premium		533			473			369			12.7			44.4
Other expense		1,080			906			926			19.2			16.6
Total noninterest expense		15,848			15,609			14,376			1.5			10.2
(Loss) income before (benefit) provision for income taxes		(3,183	)		(2,766	)		3,107			-15.1			-202.4
(Benefit) provision for income taxes		(1,203	)		(547	)		603			-119.9			-299.5
Net (loss) income	$	(1,980	)	$	(2,219	)	$	2,504			10.8	%		-179.1	%

Basic and diluted (loss) earnings per common share	$	(0.23	)	$	(0.25	)	$	0.28			8.0	%		-182.1	%

FIRST NORTHWEST BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data) (Unaudited)

	Nine Months Ended September 30,						Percent
	2024			2023			Change
INTEREST INCOME
Interest and fees on loans receivable	$	70,036		$	62,531			12.0	%
Interest on investment securities		11,367			9,886			15.0
Interest on deposits in banks		1,798			1,545			16.4
FHLB dividends		942			628			50.0
Total interest income		84,143			74,590			12.8
INTEREST EXPENSE
Deposits		31,252			18,261			71.1
Borrowings		10,708			9,092			17.8
Total interest expense		41,960			27,353			53.4
Net interest income		42,183			47,237			-10.7
PROVISION FOR CREDIT LOSSES
Provision for credit losses on loans		12,956			1,195			984.2
(Recapture of) provision for credit losses on unfunded commitments		(113	)		(1,024	)		89.0
Provision for credit losses		12,843			171			7,410.5
Net interest income after provision for credit losses		29,340			47,066			-37.7
NONINTEREST INCOME
Loan and deposit service fees		3,237			3,273			-1.1
Sold loan servicing fees and servicing rights mark-to-market		303			400			-24.3
Net gain on sale of loans		260			405			-35.8
Net loss on sale of investment securities		(2,117	)		—			100.0
Net gain on sale of premises and equipment		7,919			—			100.0
Increase in cash surrender value of bank-owned life insurance		851			668			27.4
Other income		861			2,203			-60.9
Total noninterest income		11,314			6,949			62.8
NONINTEREST EXPENSE
Compensation and benefits		25,298			23,812			6.2
Data processing		6,037			6,063			-0.4
Occupancy and equipment		4,592			3,596			27.7
Supplies, postage, and telephone		970			1,082			-10.4
Regulatory assessments and state taxes		1,518			1,259			20.6
Advertising		1,095			2,471			-55.7
Professional fees		2,292			2,619			-12.5
FDIC insurance premium		1,392			939			48.2
Other		2,566			2,623			-2.2
Total noninterest expense		45,760			44,464			2.9
(Loss) income before (benefit) provision for income taxes		(5,106	)		9,551			-153.5
(Benefit) provision for income taxes		(1,303	)		1,903			-168.5
Net (loss) income		(3,803	)		7,648			-149.7
Net loss attributable to noncontrolling interest in Quin Ventures, Inc.		—			160			-100.0
Net (loss) income attributable to parent	$	(3,803	)	$	7,808			-148.7	%

Basic and diluted (loss) earnings per common share	$	(0.43	)	$	0.87			-149.4	%

FIRST NORTHWEST BANCORP AND SUBSIDIARY
Selected Financial Ratios and Other Data
(Dollars in thousands, except per share data) (Unaudited)

	As of or For the Quarter Ended
	September 30, 2024			June 30, 2024			March 31, 2024			December 31, 2023			September 30, 2023
Performance ratios:⁽¹⁾
Return on average assets		-0.36	%		-0.40	%		0.07	%		-1.03	%		0.46	%
Return on average equity		-4.91			-5.47			0.98			-14.05			6.17
Average interest rate spread		2.21			2.27			2.28			2.40			2.54
Net interest margin⁽²⁾		2.70			2.76			2.76			2.84			2.97
Efficiency ratio⁽³⁾		100.3			72.3			88.8			150.8			80.5
Equity to total assets		7.13			7.17			7.17			7.42			7.25
Average interest-earning assets to average interest-bearing liabilities		118.0			117.6			118.3			118.2			120.0
Book value per common share	$	17.17		$	16.81		$	17.00		$	16.99		$	16.20

Tangible performance ratios:⁽¹⁾
Tangible common equity to tangible assets⁽⁴⁾		7.06	%		7.10	%		7.10	%		7.35	%		7.17	%
Return on average tangible common equity⁽⁴⁾		-4.96			-5.53			0.99			-14.20			6.23
Tangible book value per common share⁽⁴⁾	$	17.00		$	16.64		$	16.83		$	16.83		$	16.03

Asset quality ratios:
Nonperforming assets to total assets at end of period⁽⁵⁾		1.35	%		1.07	%		0.87	%		0.85	%		0.11	%
Nonaccrual loans to total loans⁽⁶⁾		1.75			1.39			1.14			1.12			0.15
Allowance for credit losses on loans to nonaccrual loans⁽⁶⁾		72.33			81.85			92.18			93.92			713.77
Allowance for credit losses on loans to total loans		1.27			1.14			1.05			1.05			1.04
Annualized net charge-offs to average outstanding loans		0.10			1.70			0.19			0.14			0.30

Capital ratios (First Fed Bank):
Tier 1 leverage		9.4	%		9.4	%		9.7	%		9.9	%		10.1	%
Common equity Tier 1 capital		12.2			12.4			12.6			13.1			13.4
Tier 1 risk-based		12.2			12.4			12.6			13.1			13.4
Total risk-based		13.4			13.5			13.6			14.1			14.4

Other Information:
Average total assets	$	2,209,333		$	2,219,370		$	2,166,187		$	2,127,655		$	2,139,734
Average total loans		1,718,402			1,717,830			1,678,656			1,645,418			1,641,206
Average interest-earning assets		2,061,970			2,072,280			2,027,821			1,980,226			1,994,251
Average noninterest-bearing deposits		252,911			251,442			249,283			259,845			276,294
Average interest-bearing deposits		1,452,817			1,408,018			1,422,116			1,379,059			1,377,734
Average interest-bearing liabilities		1,747,649			1,762,858			1,714,474			1,675,044			1,661,996
Average equity		160,479			163,079			161,867			155,971			160,994
Average common shares — basic		8,756,765			8,783,086			8,876,236			8,928,620			8,906,526
Average common shares — diluted		8,756,765			8,783,086			8,907,184			8,968,828			8,934,882
Tangible assets⁽⁴⁾		2,253,914			2,214,361			2,238,446			2,200,230			2,151,849
Tangible common equity⁽⁴⁾		159,217			157,280			158,932			161,773			154,369

(1)	Performance ratios are annualized, where appropriate.
(2)	Net interest income divided by average interest-earning assets.
(3)	Total noninterest expense as a percentage of net interest income and total other noninterest income.
(4)	See reconciliation of Non-GAAP Financial Measures later in this release.
(5)	Nonperforming assets consists of nonperforming loans (which include nonaccruing loans and accruing loans more than 90 days past due), real estate owned and repossessed assets.
(6)	Nonperforming loans consists of nonaccruing loans and accruing loans more than 90 days past due.

FIRST NORTHWEST BANCORP AND SUBSIDIARY
Selected Financial Ratios and Other Data
(Dollars in thousands, except per share data) (Unaudited)

	As of or For the Nine Months Ended September 30,
	2024			2023
Performance ratios:⁽¹⁾
Return on average assets		-0.23	%		0.50	%
Return on average equity		-3.14			6.50
Average interest rate spread		2.25			2.83
Net interest margin⁽²⁾		2.74			3.22
Efficiency ratio⁽³⁾		85.54			82.06
Equity to total assets		7.13			7.25
Average interest-earning assets to average interest-bearing liabilities		117.9			121.0
Book value per common share	$	17.17		$	16.20

Tangible performance ratios:⁽¹⁾
Tangible common equity to tangible assets⁽⁴⁾		7.06	%		7.17	%
Return on average tangible common equity⁽⁴⁾		-3.17			6.57
Tangible book value per common share⁽⁴⁾	$	17.00		$	16.03

Asset quality ratios:
Nonperforming assets to total assets at end of period⁽⁵⁾		1.35	%		0.11	%
Nonaccrual loans to total loans⁽⁶⁾		1.75			0.15
Allowance for credit losses on loans to nonaccrual loans⁽⁶⁾		72.33			713.77
Allowance for credit losses on loans to total loans		1.27			1.04
Annualized net charge-offs to average outstanding loans		0.67			0.10

Capital ratios (First Fed Bank):
Tier 1 leverage		9.4	%		10.1	%
Common equity Tier 1 capital		12.2			13.4
Tier 1 risk-based		12.2			13.4
Total risk-based		13.4			14.4

Other Information:
Average total assets	$	2,198,337		$	2,102,980
Average total loans		1,705,088			1,698,394
Average interest-earning assets		2,054,052			1,959,946
Average noninterest-bearing deposits		251,218			284,282
Average interest-bearing deposits		1,427,743			1,333,696
Average interest-bearing liabilities		1,741,683			1,619,763
Average equity		161,803			160,573
Average common shares — basic		8,805,124			8,910,391
Average common shares — diluted		8,805,124			8,930,404
Tangible assets⁽⁴⁾		2,253,914			2,151,849
Tangible common equity⁽⁴⁾		159,217			154,369

(1)	Performance ratios are annualized, where appropriate.
(2)	Net interest income divided by average interest-earning assets.
(3)	Total noninterest expense as a percentage of net interest income and total other noninterest income.
(4)	See reconciliation of Non-GAAP Financial Measures later in this release.
(5)	Nonperforming assets consists of nonperforming loans (which include nonaccruing loans and accruing loans more than 90 days past due), real estate owned and repossessed assets.
(6)	Nonperforming loans consists of nonaccruing loans and accruing loans more than 90 days past due.

FIRST NORTHWEST BANCORP AND SUBSIDIARY
ADDITIONAL INFORMATION
(Dollars in thousands) (Unaudited)

	September 30, 2024			June 30, 2024		September 30, 2023		Three Month Change			One Year Change
	(In thousands)
Real Estate:
One-to-four family	$	395,792		$	389,934	$	369,950	$	5,858		$	25,842
Multi-family		353,813			350,076		325,496		3,737			28,317
Commercial real estate		376,008			375,511		381,508		497			(5,500	)
Construction and land		95,709			107,273		143,434		(11,564	)		(47,725	)
Total real estate loans		1,221,322			1,222,794		1,220,388		(1,472	)		934
Consumer:
Home equity		76,960			72,613		64,424		4,347			12,536
Auto and other consumer		281,198			285,623		248,786		(4,425	)		32,412
Total consumer loans		358,158			358,236		313,210		(78	)		44,948
Commercial business		155,327			117,094		101,380		38,233			53,947
Total loans receivable		1,734,807			1,698,124		1,634,978		36,683			99,829
Less:
Derivative basis adjustment		(1,579	)		1,017		—		(2,596	)		(1,579	)
Allowance for credit losses on loans		21,970			19,343		16,945		2,627			5,025
Total loans receivable, net	$	1,714,416		$	1,677,764	$	1,618,033	$	36,652		$	96,383

Selected loan detail:

	September 30, 2024		June 30, 2024		September 30, 2023		Three Month Change			One Year Change
	(In thousands)
Construction and land loans breakout
1-4 Family construction	$	43,125	$	56,514	$	63,371	$	(13,389	)	$	(20,246	)
Multifamily construction		29,109		43,341		54,318		(14,232	)		(25,209	)
Nonresidential construction		17,500		1,015		18,746		16,485			(1,246	)
Land and development		5,975		6,403		6,999		(428	)		(1,024	)
Total construction and land loans	$	95,709	$	107,273	$	143,434	$	(11,564	)	$	(47,725	)

Auto and other consumer loans breakout
Triad Manufactured Home loans	$	129,600	$	125,906	$	101,339	$	3,694		$	28,261
Woodside auto loans		126,129		131,151		124,833		(5,022	)		1,296
First Help auto loans		15,971		17,427		5,079		(1,456	)		10,892
Other auto loans		2,064		2,690		5,022		(626	)		(2,958	)
Other consumer loans		7,434		8,449		12,513		(1,015	)		(5,079	)
Total auto and other consumer loans	$	281,198	$	285,623	$	248,786	$	(4,425	)	$	32,412

Commercial business loans breakout
PPP loans	$	–	$	5	$	45	$	(5	)	$	(45	)
Northpointe Bank MPP		38,155		9,150		162		29,005			37,993
Secured lines of credit		37,686		28,862		35,833		8,824			1,853
Unsecured lines of credit		1,571		1,133		919		438			652
SBA loans		7,219		7,146		9,149		73			(1,930	)
Other commercial business loans		70,696		70,798		55,272		(102	)		15,424
Total commercial business loans	$	155,327	$	117,094	$	101,380	$	38,233		$	53,947

FIRST NORTHWEST BANCORP AND SUBSIDIARY
ADDITIONAL INFORMATION
(Dollars in thousands) (Unaudited)

Non-GAAP Financial Measures
This press release contains financial measures that are not in conformity with generally accepted accounting principles in the United States of America (“GAAP”). Non-GAAP measures are presented where management believes the information will help investors understand the Company’s results of operations or financial position and assess trends. Where non-GAAP financial measures are used, the comparable GAAP financial measure is also provided. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, and are not necessarily comparable to non-GAAP performance measures that may be presented by other companies. Other banking companies may use names similar to those the Company uses for the non-GAAP financial measures the Company discloses, but may calculate them differently. Investors should understand how the Company and other companies each calculate their non-GAAP financial measures when making comparisons. Reconciliations of the GAAP and non-GAAP measures are presented below.

Calculation of Total Revenue:

	September 30, 2024		June 30, 2024		March 31, 2024		December 31, 2023			September 30, 2023
	(Dollars in thousands)
Net interest income	$	14,020	$	14,235	$	13,928	$	14,195		$	14,950
Noninterest income		1,779		7,347		2,188		(2,929	)		2,904
Total revenue, net of interest expense⁽¹⁾	$	15,799	$	21,582	$	16,116	$	11,266		$	17,854

(1) We believe this non-GAAP metric provides an important measure with which to analyze and evaluate income available for noninterest expenses.

Calculations Based on Tangible Common Equity:

	September 30, 2024			June 30, 2024			March 31, 2024			December 31, 2023			September 30, 2023
	(Dollars in thousands, except per share data)
Total shareholders’ equity	$	160,789		$	158,881		$	160,506		$	163,340		$	156,065
Less: Goodwill and other intangible assets		1,083			1,084			1,085			1,086			1,087
Disallowed non-mortgage loan servicing rights		489			517			489			481			609
Total tangible common equity	$	159,217		$	157,280		$	158,932		$	161,773		$	154,369

Total assets	$	2,255,486		$	2,215,962		$	2,240,020		$	2,201,797		$	2,153,545
Less: Goodwill and other intangible assets		1,083			1,084			1,085			1,086			1,087
Disallowed non-mortgage loan servicing rights		489			517			489			481			609
Total tangible assets	$	2,253,914		$	2,214,361		$	2,238,446		$	2,200,230		$	2,151,849

Average shareholders’ equity	$	160,479		$	163,079		$	161,867		$	155,971		$	160,994
Less: Average goodwill and other intangible assets		1,084			1,085			1,085			1,086			1,087
Average disallowed non-mortgage loan servicing rights		517			489			481			608			557
Total average tangible common equity	$	158,878		$	161,505		$	160,301		$	154,277		$	159,350

Net (loss) income	$	(1,980	)	$	(2,219	)	$	396		$	(5,522	)	$	2,504
Common shares outstanding		9,365,979			9,453,247			9,442,796			9,611,876			9,630,735
GAAP Ratios:
Equity to total assets		7.13	%		7.17	%		7.17	%		7.42	%		7.25	%
Return on average equity		-4.91	%		-5.47	%		0.98	%		-14.05	%		6.17	%
Book value per common share	$	17.17		$	16.81		$	17.00		$	16.99		$	16.20
Non-GAAP Ratios:
Tangible common equity to tangible assets⁽¹⁾		7.06	%		7.10	%		7.10	%		7.35	%		7.17	%
Return on average tangible common equity⁽¹⁾		-4.96	%		-5.53	%		0.99	%		-14.20	%		6.23	%
Tangible book value per common share⁽¹⁾	$	17.00		$	16.64		$	16.83		$	16.83		$	16.03

(1) We believe these non-GAAP metrics provide an important measure with which to analyze and evaluate financial condition and capital strength. In addition, we believe that use of tangible equity and tangible assets improves the comparability to other institutions that have not engaged in acquisitions that resulted in recorded goodwill and other intangibles.

FIRST NORTHWEST BANCORP AND SUBSIDIARY
ADDITIONAL INFORMATION
(Dollars in thousands) (Unaudited)

	September 30, 2024			September 30, 2023
	(Dollars in thousands, except per share data)
Total shareholders’ equity	$	160,789		$	156,065
Less: Goodwill and other intangible assets		1,083			1,087
Disallowed non-mortgage loan servicing rights		489			609
Total tangible common equity	$	159,217		$	154,369

Total assets	$	2,255,486		$	2,153,545
Less: Goodwill and other intangible assets		1,083			1,087
Disallowed non-mortgage loan servicing rights		489			609
Total tangible assets	$	2,253,914		$	2,151,849

Average shareholders’ equity	$	161,803		$	160,573
Less: Average goodwill and other intangible assets		1,085			1,088
Average disallowed non-mortgage loan servicing rights		496			690
Total average tangible common equity	$	160,222		$	158,795

Net (loss) income	$	(3,803	)	$	7,808
Common shares outstanding		9,365,979			9,630,735
GAAP Ratios:
Equity to total assets		7.13	%		7.25	%
Return on average equity		-3.14	%		6.50	%
Book value per common share	$	17.17		$	16.20
Non-GAAP Ratios:
Tangible common equity to tangible assets⁽¹⁾		7.06	%		7.17	%
Return on average tangible common equity⁽¹⁾		-3.17	%		6.57	%
Tangible book value per common share⁽¹⁾	$	17.00		$	16.03

(1) We believe these non-GAAP metrics provide an important measure with which to analyze and evaluate financial condition and capital strength. In addition, we believe that use of tangible equity and tangible assets improves the comparability to other institutions that have not engaged in acquisitions that resulted in recorded goodwill and other intangibles.

Images accompanying this announcement are available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/e387e9e8-0a9a-4306-8623-41b739acb402
https://www.globenewswire.com/NewsRoom/AttachmentNg/4a433c9b-6823-47f3-8843-0d8138f89182
https://www.globenewswire.com/NewsRoom/AttachmentNg/d5ca9bb6-4a5d-45aa-8336-dd1ae06f0786
https://www.globenewswire.com/NewsRoom/AttachmentNg/5b9aaf8c-4fd4-437d-af24-7ba8fc60616c

The MIL Network –

January 25, 2025

MIL-OSI Global: Haiti’s gangs turn to starving children to bolster their ranks

Source: The Conversation – UK – By Amalendu Misra, Professor of International Politics, Lancaster University

After months of relentless gang violence, thousands of killings, and the unseating of a government, Haiti is faced with another heartbreaking issue which seems likely to prolong the Caribbean island nation’s woes for another generation. Testimonies collected by Amnesty International have uncovered how Haiti’s armed gangs are enlisting hundreds of children.

Ana Piquer, Americas director at Amnesty International, says: “We have documented heartbreaking stories of children forced to work for gangs: from running deliveries to gathering information and performing domestic tasks under threats of violence.”

Boys as young as six are being forced to work as lookouts, made to build street barriers, trained to use machine guns, and are being ordered to participate in kidnappings and other acts of violence. Girls in the possession of gangs are subjected to rape and other forms of sexual violence by older male gang members, according to Piquer.

Haiti’s 200 or so armed gangs currently control around 90% of the capital city, Port-au-Prince, and large parts of the country are ungovernable. The collapse in law and order has allowed gang leaders such as Jimmy “Barbecue” Chérizier to commit terrible atrocities largely unchallenged.

The involvement of children in Haiti’s gangs is not exactly new. According to Unicef, between 30% and 50% of children in Haiti are involved with armed groups in some capacity. There are several socioeconomic explanations for this.

Haiti was once the wealthiest European colony in the Americas – and staged the only ever successful slave rebellion against its French colonial masters before declaring independence in 1804. But modern Haiti is a failed state where more than half of the population now live below the World Bank’s poverty line.

According to figures published by the International Fund for Agricultural Development, Haiti has the highest prevalence of food insecurity in Latin America and the Caribbean. One-third of the population goes hungry every day.

Impoverishment and grinding poverty has made the population desperate. With limited options for survival, many children in Haiti are drawn into criminal groups. At times, the promise of a single meal can be enough to attract a child to join a gang.

That said, the breakdown of order throughout the country has undoubtedly encouraged the gangs to increase their recruitment of children. As with most conflict zones, once indoctrinated, child soldiers make for cheap and deadly combatants.

There is also one other specific social factor that contributes to some parents turning a blind eye to their children joining the gangs. The prevalence of child recruitment by gangs can be linked to a Haitian socioeconomic practice called restaveks.

A restavek, which is Creole for “to stay with”, is a child who is given away by impoverished parents with the unwritten understanding that they will be fed, looked after and will not die of hunger. It has become a form of modern-day slavery.

The End Slavery Now project has found that “more than 300,000 children are victims of domestic slavery” in Haiti today. Many of these children regularly undergo forms of physical and sexual violence.

A set pattern

Child sex slavery and sexual abuse are familiar occurrences in societies torn by civil war. It is more likely to take place in settings where the process of governance is weak or non-existent. This situation facilitates conditions of criminal impunity, leading various actors involved in conflict to sexually exploit children.

There is an established pattern of predatory child sexual slavery in Haiti. Following the devastating earthquake that struck Haiti in 2010 and the ensuing cholera epidemic, some members of the UN peacekeeping force stationed in the country were found to have been running a child sex racket.

In 2017, an investigation by the Associated Press revealed at least 134 Sri Lankan peacekeepers were involved. It has been documented that girls as young as 11 were sexually abused and impregnated by the peacekeepers, and then subsequently abandoned to raise their children alone. Impoverished and starving Haitian children fell victim to this racket in exchange for scraps of the peacekeepers’ leftover food.

According to its own admission, the UN peacekeeping force was responsible for “transactional sex” during its operations in the country.

In 2019, the UN secretary general, António Guterres, branded violence against children as a “silent emergency” of our time. Unfortunately, not much is being done to address this challenge, despite the urgency of Guterres’ statement.

There are many existential challenges facing Haiti. Some of them are homegrown, such as the prevalence of gangs and their terror techniques.

But, as it is located on a geological fault line in a region susceptible to severe storms, Haiti is particularly prone to natural disasters. A devastating earthquake in 2010 and a cholera epidemic in 2016 debilitated the country, and the knock-on effects will last decades.

To make matters worse, Haiti also suffers from a compassion deficit. A lack of real engagement from the international community has contributed to the erosion of the Haitian civil society and left the population at the mercy of gang violence.

Even the Kenyan-led policing mission tasked with restoring order is suffering from inadequate funding and equipment, which has affected its operational capacity. Only around US$400 million (£308 million) of the US$600 million that was originally pledged for the mission has materialised, with the US shouldering a disproportionate financial burden.

Preoccupied with more high-profile conflicts elsewhere, the international community appears to have little interest in the horrors that are unfolding under the tropical sun in the faraway Caribbean.

Amalendu Misra is a recipient of British Academy and Nuffield Foundation fellowships.

– ref. Haiti’s gangs turn to starving children to bolster their ranks – https://theconversation.com/haitis-gangs-turn-to-starving-children-to-bolster-their-ranks-241386

MIL OSI – Global Reports –

January 25, 2025

MIL-OSI Global: Palestine’s economy teeters on the brink after a year of war and unrelenting destruction

Source: The Conversation – UK – By Dalia Alazzeh, Lecturer in Accounting and Finance, University of the West of Scotland

The Palestinian economy has been devastated beyond recognition. Israel’s intense military operations in Gaza have led to unprecedented destruction, wiping out much of the enclave’s essential infrastructure, private property and agricultural resources.

Meanwhile, the occupied West Bank is also under severe strain. Similar patterns of destruction, alongside rising settler violence, land confiscations and expanding settlements, have left its economy buckling under the pressure of mounting public debt, unemployment and poverty.

Gaza’s economy was being suffocated even before the war. A blockade imposed by Israel in 2007 has severely restricted the import and export of goods, while fishermen were limited to a six-mile zone, crippling their ability to earn a livelihood.

The blockade caused Gaza’s GDP per capita (a measure of the wealth of a country) to shrink by 27% between 2006 and 2022, with unemployment rising to 45.3%. This gave rise to a situation where 80% of the population depended on international aid.

In addition to the economic blockade, Gaza suffered massive physical destruction due to Israeli military operations in 2008–2009, 2012, 2014, 2021 and 2022. Yet the cumulative effects of 16 years of blockade and military attacks are minor compared to the sheer destruction caused by the current war.

A report by the UN’s trade and development wing (Unctad) has revealed that in the space of just eight months, between October 2023 and May 2024, Gaza’s GDP per capita was fell by more than half. The economic situation now is almost certainly worse.

According to the report, which was released in September 2024, Gaza’s GDP dropped by 81% in the final quarter of 2023 alone. The report concluded that the war had left Gaza’s economy in “utter ruin”, warning that even if there was an immediate ceasefire and the 2007–2022 growth trend of 0.4% returns, it will take 350 years just to restore the GDP levels of 2022.

The only sectors still functioning are health and humanitarian services. All other industries, including agriculture, are at a near standstill. The destruction of between 80% and 96% of agricultural assets has led to rampant food insecurity.

The scale of destruction in Gaza is unprecedented in modern times and is happening under the world’s gaze. From October 2023 to January 2024 alone, the total cost of damage reached approximately US$18.5 billion (£14.2 billion) – equivalent to seven times Gaza’s GDP in 2022.

A separate report by the UN Development Programme, which was published in May, predicts that it will take more than 80 years to rebuild just Gaza’s housing stock if it repeats the rate of restructuring seen after Israeli military operations in 2014 and 2021. Merely clearing the debris could take up to 14 years.

The war has displaced almost all of Gaza’s population, and has thrown people into dire poverty. Unemployment surged to 80%, leaving most households without any source of income. And prices of basic commodities have increased by 250%, which is contributing to famine across the Strip.

The Gaza Strip is in ruins after more than a year of relentless bombardment.
Anas-Mohammed / Shutterstock

The economic crisis has also extended to the West Bank, where GDP has fallen sharply. Military checkpoints, cement blocks and iron gates at the entrances to Palestinian towns and cities, as well as the denial of work permits for Palestinians in Israeli settlements, have resulted in more than 300,000 job losses since the start of the war.

The Unctad report reveals that the rate of unemployment in the West Bank has tripled to 32% since the start of the conflict, with labour income losses amounting to US$25.5 million. Poverty is rising rapidly.

Israeli forces have also continued to confiscate Palestinian homes and land. Over the past year alone, 24,000 acres of land in the West Bank have been seized, and over 2,000 Palestinians have been displaced.

This devastation has been exacerbated by Israel’s decision to withhold the tax revenue it collects for the Palestinian Authority, which typically accounts for between 60% and 65% of the Palestinian public budget, as well as a significant decline in international aid. Aid to Palestine has dropped drastically over the past decade or so, falling from the equivalent of US$2 billion in 2008 to just US$358 million by 2023.

The Palestinian Authority is facing a massive budget deficit, which is projected to increase by 172% in 2024 compared to the previous year. This financial strain has crippled the Palestinian government’s ability to provide essential services, pay salaries and meet the needs of a population battered by war, displacement and severe poverty.

The road to recovery

For the Palestinian economy to have any chance at recovery, several immediate steps are necessary.

First, international aid should flow into Gaza uninterrupted, and pressure must be applied to ensure that humanitarian aid – particularly food aid – reaches those in need. Data analysis by organisations working in Gaza suggests that Israel is currently blocking 83% of food aid from reaching Gaza.

Second, the destruction of homes, schools and infrastructure must cease. However, this seems improbable as Israel continues to pursue its military goal of destroying Hamas – an objective most analysts believe to be unachievable.

And third, the economic restrictions imposed on Gaza and the West Bank must be lifted. Sustainable development – and any prospect for recovery – cannot be achieved without granting the Palestinian people the right to self-determination and sovereignty over their resources.

This would require new peace agreements, an outcome that appears unlikely at present. But without these crucial interventions, the Palestinian economy will be completely devastated and the humanitarian crisis will worsen, making any future recovery within the lifetime of anyone currently living in Gaza virtually impossible to imagine.

The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.

– ref. Palestine’s economy teeters on the brink after a year of war and unrelenting destruction – https://theconversation.com/palestines-economy-teeters-on-the-brink-after-a-year-of-war-and-unrelenting-destruction-241607

MIL OSI – Global Reports –

January 25, 2025

MIL-OSI: Eagle Bancorp Montana Earns $2.7 Million, or $0.34 per Diluted Share, in the Third Quarter of 2024; Declares Quarterly Cash Dividend of $0.1425 Per Share

Source: GlobeNewswire (MIL-OSI)

HELENA, Mont., Oct. 29, 2024 (GLOBE NEWSWIRE) — Eagle Bancorp Montana, Inc. (NASDAQ: EBMT), (the “Company,” “Eagle”), the holding company of Opportunity Bank of Montana (the “Bank”), today reported net income of $2.7 million, or $0.34 per diluted share, in the third quarter of 2024, compared to $1.7 million, or $0.22 per diluted share, in the preceding quarter, and $2.6 million, or $0.34 per diluted share, in the third quarter of 2023. In the first nine months of 2024, net income was $6.3 million, or $0.81 per diluted share, compared to $7.9 million, or $1.01 per diluted share, in the first nine months of 2023.

Eagle’s board of directors declared a quarterly cash dividend of $0.1425 per share on October 17, 2024. The dividend will be payable December 6, 2024, to shareholders of record November 15, 2024. The current dividend represents an annualized yield of 3.49% based on recent market prices.

“We produced improved top and bottom line operating results during the third quarter of 2024, with net interest income and noninterest income both increasing compared to the second quarter of 2024,” said Laura F. Clark, President and CEO. “As in previous quarters, we continued to remain selective on the loans we added during the quarter, while adhering to disciplined loan pricing. The result was tempered loan growth during the third quarter of 1.1%, and 4.0% year-over-year. Total deposits increased 2.0% during the quarter over the linked quarter, as we continue to maintain our attractive deposit mix. With our strong deposit franchise, pristine credit quality, and ample capital levels, we are well positioned for growth throughout the remainder of the year and into 2025.”

Third Quarter 2024 Highlights (at or for the three-month period ended September 30, 2024, except where noted):

Net income was $2.7 million, or $0.34 per diluted share, in the third quarter of 2024, compared to $1.7 million, or $0.22 per diluted share, in the preceding quarter, and $2.6 million, or $0.34 per diluted share, in the third quarter a year ago.
Net interest margin (“NIM”) was 3.34% in the third quarter of 2024, a seven basis point contraction compared to 3.41% in the preceding quarter and the third quarter a year ago.
Revenues (net interest income before the provision for credit losses, plus noninterest income) were $20.8 million in the third quarter of 2024, compared to $19.9 million in the preceding quarter and $21.6 million in the third quarter a year ago.
The accretion of the loan purchase discount into loan interest income from acquisitions was $167,000 in the third quarter of 2024, compared to accretion on purchased loans from acquisitions of $304,000 in the preceding quarter.
Total loans increased 4.0% to $1.53 billion, at September 30, 2024, compared to $1.48 billion a year earlier, and increased 1.1% compared to $1.52 billion at June 30, 2024.
Total deposits increased $35.0 million or 2.2% to $1.65 billion at September 30, 2024, compared to a year earlier, and increased $31.6 million or 2.0%, compared to June 30, 2024.
The allowance for credit losses represented 1.12% of portfolio loans and 356.7% of nonperforming loans at September 30, 2024, compared to 1.10% of portfolio loans and 209.3% of nonperforming loans at September 30, 2023.
The Company’s available borrowing capacity was approximately $348.1 million at September 30, 2024.

	September 30, 2024
(Dollars in thousands)	Borrowings Outstanding		Remaining Borrowing Capacity
Federal Home Loan Bank advances	$	219,167	$	219,365
Federal Reserve Bank discount window		–		28,734
Correspondent bank lines of credit		–		100,000
Total	$	219,167	$	348,099

The Company paid a quarterly cash dividend in the second quarter of $0.1425 per share on September 6, 2024, to shareholders of record August 16, 2024.

Balance Sheet Results

Eagle’s total assets increased 4.0% to $2.15 billion at September 30, 2024, compared to $2.06 billion a year ago, and increased 2.2% compared to $2.10 billion three months earlier. The investment securities portfolio totaled $307.0 million at September 30, 2024, compared to $308.8 million a year ago, and $306.9 million at June 30, 2024.

Eagle originated $58.0 million in new residential mortgages during the quarter and sold $51.0 million in residential mortgages, with an average gross margin on sale of mortgage loans of approximately 3.31%. This production compares to residential mortgage originations of $60.6 million in the preceding quarter with sales of $53.2 million and an average gross margin on sale of mortgage loans of approximately 3.01%. Mortgage volumes remain low as rates have continued to be elevated relative to rates on existing mortgages.

Total loans increased $58.9 million, or 4.0%, compared to a year ago, and $17.2 million, or 1.1%, from three months earlier. Commercial real estate loans increased 5.2% to $644.0 million at September 30, 2024, compared to $612.0 million a year earlier. Commercial real estate loans were comprised of 69.3% non-owner occupied and 30.7% owner occupied at September 30, 2024. Agricultural and farmland loans increased 5.8% to $290.0 million at September 30, 2024, compared to $274.1 million a year earlier. Residential mortgage loans increased 6.7% to $156.8 million, compared to $146.9 million a year earlier. Commercial loans increased 10.2% to $143.2 million, compared to $130.0 million a year ago. Commercial construction and development loans decreased 17.3% to $125.3 million, compared to $151.6 million a year ago. Home equity loans increased 12.5% to $93.6 million, residential construction loans increased 8.5% to $52.2 million, and consumer loans decreased 1.3% to $29.4 million, compared to a year ago.

“Our deposit mix continued to shift towards higher yielding deposits due to the higher interest rate environment. However, we anticipate deposit rates will continue to stabilize or improve following the recent Fed rate cuts,” said Miranda Spaulding, CFO.

Total deposits increased to $1.65 billion at September 30, 2024, compared to $1.62 billion at September 30, 2023, and at June 30, 2024. Noninterest-bearing checking accounts represented 25.4%, interest-bearing checking accounts represented 12.7%, savings accounts represented 12.9%, money market accounts comprised 21.3% and time certificates of deposit made up 27.7% of the total deposit portfolio at September 30, 2024. Time certificates of deposit include $22.1 million in brokered certificates at September 30, 2024, compared to $40.0 million at September 30, 2023, and $26.2 million at June 30, 2024. The average cost of total deposits was 1.76% in the third quarter of 2024, compared to 1.70% in the preceding quarter and 1.28% in the third quarter of 2023. The estimated amount of uninsured deposits was approximately $307.0 million, or 18% of total deposits, at September 30, 2024, compared to $284.0 million, or 17% of total deposits, at June 30, 2024.

Shareholders’ equity was $177.7 million at September 30, 2024, compared to $157.3 million a year earlier and $170.2 million three months earlier. Book value per share increased to $22.17 at September 30, 2024, compared to $19.69 a year earlier and $21.23 three months earlier. Tangible book value per share, a non-GAAP financial measure calculated by dividing shareholders’ equity, less goodwill and core deposit intangible, by common shares outstanding, was $17.23 at September 30, 2024, compared to $14.55 a year earlier and $16.25 three months earlier.

Operating Results

“Our core NIM declined slightly during the third quarter, compared to the preceding quarter, due to relatively flat yields on interest earning assets and cost of funds expansion,” said Clark. “We anticipate continued stabilization and eventual improvement in our cost of funds as we continue through this rate cycle.”

Eagle’s NIM was 3.34% in the third quarter of 2024, a seven basis point contraction compared to 3.41% in both the preceding quarter and the third quarter a year ago. The interest accretion on acquired loans totaled $167,000 and resulted in a three basis-point increase in the NIM during the third quarter of 2024, compared to $304,000 and a seven basis-point increase in the NIM during the preceding quarter. Funding costs for the third quarter of 2024 were 2.89%, compared to 2.78% in the second quarter of 2024 and 2.37% in the third quarter of 2023. Average yields on interest earning assets for the third quarter of 2024 increased to 5.66%, compared to 5.64% in the second quarter of 2024 and 5.27% in the third quarter a year ago. For the first nine months of 2024, the NIM was 3.36% compared to 3.57% for the first nine months of 2023.

Net interest income, before the provision for credit losses, increased to $15.8 million in the third quarter of 2024, compared to $15.6 million in both the second quarter of 2024, and in the third quarter of 2023. Year-to-date, net interest income decreased 1.3% to $46.6 million, compared to $47.3 million in the same period one year earlier.

Revenues for the third quarter of 2024 increased 4.4% to $20.8 million, compared to $19.9 million in the preceding quarter and decreased 3.9% compared to $21.6 million in the third quarter a year ago. In the first nine months of 2024, revenues were $59.9 million, compared to $64.2 million in the first nine months of 2023. The decrease compared to the first nine months a year ago was largely due to lower volumes in mortgage banking activity.

Total noninterest income increased 16.7% to $5.0 million in the third quarter of 2024, compared to $4.3 million in the preceding quarter, and decreased 17.4% compared to $6.0 million in the third quarter a year ago. The increase from the preceding quarter was largely due to income from bank owned life insurance of $724,000. Net mortgage banking income, the largest component of noninterest income, totaled $2.6 million in the third quarter of 2024, compared to $2.4 million in the preceding quarter and $4.3 million in the third quarter a year ago. This decrease compared to the third quarter a year ago was largely driven by a decline in net gain on sale of mortgage loans. This was impacted by lower mortgage loan volumes. In the first nine months of 2024, noninterest income decreased 21.9% to $13.2 million, compared to $16.9 million in the first nine months of 2023. Net mortgage banking income decreased 36.0% to $7.2 million in the first nine months of 2024, compared to $11.3 million in the first nine months of 2023. These decreases were driven by a decline in net gain on sale of mortgage loans.

Third quarter noninterest expense was $17.3 million, which was unchanged compared to the preceding quarter and a 3.4% decrease compared to $17.9 million in the third quarter a year ago. Lower salaries and employee benefits contributed to the decrease compared to the year ago quarter. In the first nine months of 2024, noninterest expense decreased 3.0% to $51.6 million, compared to $53.2 million in the first nine months of 2023.

For the third quarter of 2024, the Company recorded income tax expense of $529,000. This compared to income tax expense of $444,000 in the preceding quarter and $524,000 in the third quarter of 2023. The effective tax rate for the third quarter of 2024 was 16.3%, compared to 16.6% for the third quarter of 2023. The year-to-date effective tax rate was 17.5% for 2024 compared to 19.5% for the same period in 2023.

Credit Quality

During the third quarter of 2024, Eagle recorded a provision for credit losses of $277,000. This compared to a $412,000 provision for credit losses in the preceding quarter and $588,000 in the third quarter a year ago. The allowance for credit losses represented 356.7% of nonperforming loans at September 30, 2024, compared to 330.8% three months earlier and 209.3% a year earlier. Nonperforming loans were $4.8 million at September 30, 2024, $5.1 million at June 30, 2024, and $7.8 million a year earlier.

Net loan charge-offs totaled $17,000 in the third quarter of 2024, compared to net loan charge-offs of $2,000 in the preceding quarter and net loan charge-offs of $108,000 in the third quarter a year ago. The allowance for credit losses was $17.1 million, or 1.12% of total loans, at September 30, 2024, compared to $16.8 million, or 1.11% of total loans, at June 30, 2024, and $16.2 million, or 1.10% of total loans, a year ago.

Capital Management

The ratio of tangible common shareholders’ equity (shareholders’ equity, less goodwill and core deposit intangible) to tangible assets (total assets, less goodwill and core deposit intangible) was 6.56% at September 30, 2024, from 5.75% a year ago and 6.33% three months earlier. As of September 30, 2024, the Bank’s regulatory capital was in excess of all applicable regulatory requirements and is deemed well capitalized. The Bank’s Tier 1 capital to adjusted total average assets was 9.87% as of September 30, 2024.

About the Company

Eagle Bancorp Montana, Inc. is a bank holding company headquartered in Helena, Montana, and is the holding company of Opportunity Bank of Montana, a community bank established in 1922 that serves consumers and small businesses in Montana through 29 banking offices. Additional information is available on the Bank’s website at www.opportunitybank.com. The shares of Eagle Bancorp Montana, Inc. are traded on the NASDAQ Global Market under the symbol “EBMT.”

Forward Looking Statements

This release may contain certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and may be identified by the use of such words as “believe,” “will” “expect,” “anticipate,” “should,” “planned,” “estimated,” and “potential.” These forward-looking statements include, but are not limited to statements of our goals, intentions and expectations; statements regarding our business plans, prospects, mergers, growth and operating strategies; statements regarding the asset quality of our loan and investment portfolios; and estimates of our risks and future costs and benefits. These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. These factors include, but are not limited to, changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements; general economic conditions and political events, either nationally or in our market areas, that are worse than expected including the ability of the U.S. Congress to increase the U.S. statutory debt limit, as needed, as well as the impact of the 2024 U.S. presidential election; the emergence or continuation of widespread health emergencies or pandemics including the magnitude and duration of the COVID-19 pandemic, including but not limited to vaccine efficacy and immunization rates, new variants, steps taken by governmental and other authorities to contain, mitigate and combat the pandemic, adverse effects on our employees, customers and third-party service providers, the increase in cyberattacks in the current work-from-home environment, the ultimate extent of the impacts on our business, financial position, results of operations, liquidity and prospects, continued deterioration in general business and economic conditions could adversely affect our revenues and the values of our assets and liabilities, lead to a tightening of credit and increase stock price volatility, and potential impairment charges; the impact of volatility in the U.S. banking industry, including the associated impact of any regulatory changes or other mitigation efforts taken by governmental agencies in response thereto; the possibility that future credit losses may be higher than currently expected due to changes in economic assumptions, customer behavior, adverse developments with respect to U.S. economic conditions and other uncertainties, including the impact of supply chain disruptions, inflationary pressures and labor shortages on economic conditions and our business; an inability to access capital markets or maintain deposits or borrowing costs; competition among banks, financial holding companies and other traditional and non-traditional financial service providers; loan demand or residential and commercial real estate values in Montana; the concentration of our business in Montana; our ability to continue to increase and manage our commercial real estate, commercial business and agricultural loans; the costs and effects of legal, compliance and regulatory actions, changes and developments, including the initiation and resolution of legal proceedings (including any securities, bank operations, consumer or employee litigation); inflation and changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments; adverse changes in the securities markets that lead to impairment in the value of our investment securities and goodwill; other economic, governmental, competitive, regulatory and technological factors that may affect our operations; our ability to implement new technologies and maintain secure and reliable technology systems including those that involve the Bank’s third-party vendors and service providers; cyber incidents, or theft or loss of Company or customer data or money; our ability to appropriately address social, environmental, and sustainability concerns that may arise from our business activities; the effect of our recent or future acquisitions, including the failure to achieve expected revenue growth and/or expense savings, the failure to effectively integrate their operations, the outcome of any legal proceedings and the diversion of management time on issues related to the integration.

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. All information set forth in this press release is current as of the date of this release and the company undertakes no duty or obligation to update this information.

Use of Non-GAAP Financial Measures

In addition to results presented in accordance with generally accepted accounting principles utilized in the United States, or GAAP, the Financial Ratios and Other Data contains non-GAAP financial measures. Non-GAAP financial measures include: 1) core efficiency ratio, 2) tangible book value per share and 3) tangible common equity to tangible assets. The Company uses these non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and performance trends, and to enhance investors’ overall understanding of such financial performance. In particular, the use of tangible book value per share and tangible common equity to tangible assets is prevalent among banking regulators, investors and analysts.

The numerator for the core efficiency ratio is calculated by subtracting acquisition costs and intangible asset amortization from noninterest expense. Tangible assets and tangible common shareholders’ equity are calculated by excluding intangible assets from assets and shareholders’ equity, respectively. For these financial measures, our intangible assets consist of goodwill and core deposit intangible. Tangible book value per share is calculated by dividing tangible common shareholders’ equity by the number of common shares outstanding. We believe that this measure is consistent with the capital treatment by our bank regulatory agencies, which exclude intangible assets from the calculation of risk-based capital ratios and present this measure to facilitate the comparison of the quality and composition of our capital over time and in comparison, to our competitors.

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names. Further, the non-GAAP financial measure of tangible book value per share should not be considered in isolation or as a substitute for book value per share or total shareholders’ equity determined in accordance with GAAP, and may not be comparable to a similarly titled measure reported by other companies. Reconciliation of the GAAP and non-GAAP financial measures are presented below.


Balance Sheet
(Dollars in thousands, except per share data)					(Unaudited)
		September 30,			June 30,			September 30,
			2024			2024			2023

Assets:
	Cash and due from banks	$	22,954		$	22,361		$	19,743
	Interest bearing deposits in banks		19,035			1,401			1,040
	Federal funds sold		200			–			–
	Total cash and cash equivalents		42,189			23,762			20,783
	Securities available-for-sale, at fair value		306,982			306,869			308,786
	Federal Home Loan Bank (“FHLB”) stock		11,218			10,136			10,438
	Federal Reserve Bank (“FRB”) stock		4,131			4,131			4,131
	Mortgage loans held-for-sale, at fair value		13,429			10,518			17,880
	Loans:
	Real estate loans:
	Residential 1-4 family		156,811			157,053			146,938
	Residential 1-4 family construction		52,217			50,228			48,135
	Commercial real estate		644,019			627,326			611,963
	Commercial construction and development		125,323			137,427			151,614
	Farmland		145,356			142,353			143,789
	Other loans:
	Home equity		93,646			93,213			83,221
	Consumer		29,445			29,118			29,832
	Commercial		143,190			143,641			129,952
	Agricultural		144,645			137,134			130,329
	Total loans		1,534,652			1,517,493			1,475,773
	Allowance for credit losses		(17,130	)		(16,830	)		(16,230	)
	Net loans		1,517,522			1,500,663			1,459,543
	Accrued interest and dividends receivable		14,844			13,195			13,657
	Mortgage servicing rights, net		15,443			15,614			15,738
	Assets held-for-sale, at cost		257			257			–
	Premises and equipment, net		100,297			98,397			92,979
	Cash surrender value of life insurance, net		52,852			48,529			47,647
	Goodwill		34,740			34,740			34,740
	Core deposit intangible, net		4,834			5,168			6,264
	Other assets		26,375			26,976			30,478
	Total assets	$	2,145,113		$	2,098,955		$	2,063,064

Liabilities:
	Deposit accounts:
	Noninterest bearing	$	419,760		$	400,113		$	435,655
	Interest bearing		1,230,752			1,218,752			1,179,823
	Total deposits		1,650,512			1,618,865			1,615,478
	Accrued expenses and other liabilities		38,593			35,804			31,597
	FHLB advances and other borrowings		219,167			215,050			199,757
	Other long-term debt, net		59,111			59,074			58,962
	Total liabilities		1,967,383			1,928,793			1,905,794

Shareholders’ Equity:
	Preferred stock (par value $0.01 per share; 1,000,000 shares
	authorized; no shares issued or outstanding)		–			–			–
	Common stock (par value $0.01; 20,000,000 shares authorized;
	8,507,429 shares issued; 8,016,784, 8,016,784 and 7,988,132
	shares outstanding at September 30, 2024, June 30, 2024 and
	September 30, 2023, respectively		85			85			85
	Additional paid-in capital		109,040			108,962			109,422
	Unallocated common stock held by Employee Stock Ownership Plan		(4,154	)		(4,297	)		(4,727	)
	Treasury stock, at cost (490,645, 490,645 and 519,297 shares at
	September 30, 2024, June 30, 2024 and September 30, 2023, respectively)		(11,124	)		(11,124	)		(11,574	)
	Retained earnings		98,979			97,413			94,979
	Accumulated other comprehensive loss, net of tax		(15,096	)		(20,877	)		(30,915	)
	Total shareholders’ equity		177,730			170,162			157,270
	Total liabilities and shareholders’ equity	$	2,145,113		$	2,098,955		$	2,063,064

Income Statement			(Unaudited)						(Unaudited)
(Dollars in thousands, except per share data)			Three Months Ended						Nine Months Ended
			September 30,		June 30,		September 30,		September 30,
				2024		2024		2023		2024		2023
Interest and dividend income:
	Interest and fees on loans		$	23,802	$	22,782	$	21,068	$	68,526	$	57,942
	Securities available-for-sale			2,598		2,631		2,794		7,953		8,586
	FRB and FHLB dividends			266		264		212		777		480
	Other interest income			94		145		20		268		66
		Total interest and dividend income		26,760		25,822		24,094		77,524		67,074
Interest expense:
	Interest expense on deposits			7,190		6,884		5,152		20,622		11,767
	FHLB advances and other borrowings			3,084		2,625		2,672		8,206		5,993
	Other long-term debt			684		681		683		2,048		2,035
		Total interest expense		10,958		10,190		8,507		30,876		19,795
Net interest income				15,802		15,632		15,587		46,648		47,279
Provision for credit losses				277		412		588		554		1,186
		Net interest income after provision for credit losses		15,525		15,220		14,999		46,094		46,093

Noninterest income:
	Service charges on deposit accounts			430		428		447		1,258		1,313
	Mortgage banking, net			2,602		2,417		4,338		7,196		11,252
	Interchange and ATM fees			662		640		643		1,865		1,861
	Appreciation in cash surrender value of life insurance			1,038		320		382		1,646		1,165
	Net loss on sale of available-for-sale securities			–		–		–		–		(222	)
	Other noninterest income			251		464		225		1,239		1,541
		Total noninterest income		4,983		4,269		6,035		13,204		16,910

Noninterest expense:
	Salaries and employee benefits			9,894		10,273		10,837		29,885		31,614
	Occupancy and equipment expense			2,134		2,104		1,956		6,337		6,100
	Data processing			1,587		1,382		1,486		4,494		4,270
	Advertising			277		316		340		846		930
	Amortization			337		348		386		1,054		1,201
	Loan costs			385		412		517		1,195		1,426
	FDIC insurance premiums			295		284		301		878		862
	Professional and examination fees			438		423		408		1,345		1,484
	Other noninterest expense			1,923		1,765		1,644		5,576		5,311
		Total noninterest expense		17,270		17,307		17,875		51,610		53,198

Income before provision for income taxes				3,238		2,182		3,159		7,688		9,805
Provision for income taxes				529		444		524		1,343		1,913
Net income			$	2,709	$	1,738	$	2,635	$	6,345	$	7,892

Basic earnings per common share			$	0.35	$	0.22	$	0.34	$	0.81	$	1.01
Diluted earnings per common share			$	0.34	$	0.22	$	0.34	$	0.81	$	1.01

Basic weighted average shares outstanding				7,836,921		7,830,925		7,784,279		7,830,947		7,787,987

Diluted weighted average shares outstanding				7,860,138		7,845,272		7,791,966		7,848,196		7,792,593

ADDITIONAL FINANCIAL INFORMATION					(Unaudited)
(Dollars in thousands, except per share data)		Three or Nine Months Ended
		September 30,			June 30,			September 30,
			2024			2024			2023

Mortgage Banking Activity (For the quarter):
	Net gain on sale of mortgage loans	$	1,691		$	1,600		$	3,591
	Net change in fair value of loans held-for-sale and derivatives		159			12			(71	)
	Mortgage servicing income, net		752			805			818
	Mortgage banking, net	$	2,602		$	2,417		$	4,338

Mortgage Banking Activity (Year-to-date):
	Net gain on sale of mortgage loans	$	4,705					$	8,551
	Net change in fair value of loans held-for-sale and derivatives		(2	)					234
	Mortgage servicing income, net		2,493						2,467
	Mortgage banking, net	$	7,196					$	11,252

Performance Ratios (For the quarter):
	Return on average assets		0.51	%		0.33	%		0.51	%
	Return on average equity		6.56	%		4.30	%		6.63	%
	Yield on average interest earning assets		5.66	%		5.64	%		5.27	%
	Cost of funds		2.89	%		2.78	%		2.37	%
	Net interest margin		3.34	%		3.41	%		3.41	%
	Core efficiency ratio*		81.47	%		85.22	%		80.89	%

Performance Ratios (Year-to-date):
	Return on average assets		0.41	%					0.53	%
	Return on average equity		5.19	%					6.54	%
	Yield on average interest earning assets		5.59	%					5.07	%
	Cost of funds		2.78	%					1.94	%
	Net interest margin		3.36	%					3.57	%
	Core efficiency ratio*		84.47	%					81.01	%

* The core efficiency ratio is a non-GAAP ratio that is calculated by dividing non-interest expense, exclusive of acquisition
costs and intangible asset amortization, by the sum of net interest income and non-interest income.


ADDITIONAL FINANCIAL INFORMATION
(Dollars in thousands, except per share data)
					(Unaudited)
Asset Quality Ratios and Data:		As of or for the Three Months Ended
		September 30,			June 30,			September 30,
			2024			2024			2023

	Nonaccrual loans	$	3,859		$	4,012		$	7,753
	Loans 90 days past due and still accruing		944			1,076			–
	Total nonperforming loans		4,803			5,088			7,753
	Other real estate owned and other repossessed assets		4			4			–
	Total nonperforming assets	$	4,807		$	5,092		$	7,753

	Nonperforming loans / portfolio loans		0.31	%		0.34	%		0.53	%
	Nonperforming assets / assets		0.22	%		0.24	%		0.38	%
	Allowance for credit losses / portfolio loans		1.12	%		1.11	%		1.10	%
	Allowance for credit losses/ nonperforming loans		356.65	%		330.78	%		209.34	%
	Gross loan charge-offs for the quarter	$	22		$	12		$	122
	Gross loan recoveries for the quarter	$	5		$	10		$	14
	Net loan charge-offs for the quarter	$	17		$	2		$	108


		September 30,			June 30,			September 30,
			2024			2024			2023
Capital Data (At quarter end):
	Common shareholders’ equity (book value) per share	$	22.17		$	21.23		$	19.69
	Tangible book value per share**	$	17.23		$	16.25		$	14.55
	Shares outstanding		8,016,784			8,016,784			7,988,132
	Tangible common equity to tangible assets***		6.56	%		6.33	%		5.75	%

Other Information:
	Average investment securities for the quarter	$	305,730		$	306,207		$	319,308
	Average investment securities year-to-date	$	308,688		$	310,168		$	335,898
	Average loans for the quarter ****	$	1,547,246		$	1,513,313		$	1,476,584
	Average loans year-to-date ****	$	1,519,951		$	1,506,303		$	1,417,291
	Average earning assets for the quarter	$	1,874,669		$	1,837,418		$	1,812,610
	Average earning assets year-to-date	$	1,847,468		$	1,833,867		$	1,768,361
	Average total assets for the quarter	$	2,116,839		$	2,077,448		$	2,052,443
	Average total assets year-to-date	$	2,086,951		$	2,072,013		$	1,999,864
	Average deposits for the quarter	$	1,622,254		$	1,625,882		$	1,602,770
	Average deposits year-to-date	$	1,624,936		$	1,625,826		$	1,596,201
	Average equity for the quarter	$	165,162		$	161,533		$	158,933
	Average equity year-to-date	$	163,106		$	162,084		$	160,917

** The tangible book value per share is a non-GAAP ratio that is calculated by dividing shareholders’ equity,
less goodwill and core deposit intangible, by common shares outstanding.
*** The tangible common equity to tangible assets is a non-GAAP ratio that is calculated by dividing shareholders’
equity, less goodwill and core deposit intangible, by total assets, less goodwill and core deposit intangible.
**** Includes loans held for sale

Reconciliation of Non-GAAP Financial Measures

Core Efficiency Ratio						(Unaudited)						(Unaudited)
(Dollars in thousands)			Three Months Ended									Nine Months Ended
			September 30,			June 30,			September 30,			September 30,
				2024			2024			2023			2024			2023
Calculation of Core Efficiency Ratio:
	Noninterest expense		$	17,270		$	17,307		$	17,875		$	51,610		$	53,198
	Intangible asset amortization			(337	)		(348	)		(386	)		(1,054	)		(1,201	)
		Core efficiency ratio numerator		16,933			16,959			17,489			50,556			51,997

	Net interest income			15,802			15,632			15,587			46,648			47,279
	Noninterest income			4,983			4,269			6,035			13,204			16,910
		Core efficiency ratio denominator		20,785			19,901			21,622			59,852			64,189

	Core efficiency ratio (non-GAAP)			81.47	%		85.22	%		80.89	%		84.47	%		81.01	%

Tangible Book Value and Tangible Assets			(Unaudited)
(Dollars in thousands, except per share data)			September 30,			June 30,			September 30,
				2024			2024			2023
Tangible Book Value:
	Shareholders’ equity		$	177,730		$	170,162		$	157,270
	Goodwill and core deposit intangible, net			(39,574	)		(39,908	)		(41,004	)
		Tangible common shareholders’ equity (non-GAAP)	$	138,156		$	130,254		$	116,266

	Common shares outstanding at end of period			8,016,784			8,016,784			7,988,132

	Common shareholders’ equity (book value) per share (GAAP)		$	22.17		$	21.23		$	19.69

	Tangible common shareholders’ equity (tangible book value)
		per share (non-GAAP)	$	17.23		$	16.25		$	14.55

Tangible Assets:
	Total assets		$	2,145,113		$	2,098,955		$	2,063,064
	Goodwill and core deposit intangible, net			(39,574	)		(39,908	)		(41,004	)
		Tangible assets (non-GAAP)	$	2,105,539		$	2,059,047		$	2,022,060

	Tangible common shareholders’ equity to tangible assets
		(non-GAAP)		6.56	%		6.33	%		5.75	%

Contacts:	Laura F. Clark, President and CEO
	(406) 457-4007
	Miranda J. Spaulding, SVP and CFO
	(406) 441-5010

The MIL Network –

January 25, 2025

MIL-OSI: New CINQ by Coinstar™ Digital Wallet Launches Crypto and Stablecoin Capabilities Powered by Zero Hash

Source: GlobeNewswire (MIL-OSI)

CHICAGO, Oct. 29, 2024 (GLOBE NEWSWIRE) — Zero Hash, the leading crypto and stablecoin infrastructure platform, today announced its partnership with Coinstar®, LLC, a global financial services leader, to embed crypto payments capabilities within CINQ by Coinstar™, a new digital wallet designed to expand how consumers use and manage their finances. This collaboration allows up to 9,500 of Coinstar’s 17,000+ network of kiosks across the U.S. to facilitate cash-to-crypto transactions.

Through a partnership with Zero Hash, CINQ by Coinstar has launched with the initial ability to purchase cryptocurrency and stablecoins with cash at more than 9,500 Coinstar kiosks across the U.S., or through the CINQ by Coinstar mobile app. Users of the CINQ by Coinstar app, powered by Zero Hash, can seamlessly move in, out and between cash, stablecoins and crypto. A broader range of digital payment services for the CINQ by Coinstar wallet are expected to follow in 2025 as recently announced by Coinstar.

The overarching objective of the partnership is to provide a seamless mechanism of dollar digitalization to the large percentage of underbanked and underserved households within the United States. Specifically: 

The unbanked who now have access to an electronic cash account
- 6% of Adult Americans are unbanked; 24.6 million Americans are underbanked (Source: Fed Reserve, 2024)
The immigrant remitting money home
- About half of all remittances are cash-based among the most common users (Source: Visa, 2023)

“Zero Hash is delighted to partner with Coinstar, a household brand in money transformation for more than 30 years. Its vast network of self-serve kiosks and mobile apps will help further expand access to the underbanked and immigrants looking to remit funds. Upwards of 50% of remittances are cash-based and the multiple “hops” in remittance often mean these transfers incur high fees. Linking this cash infrastructure to the “network of networks” which is crypto and stablecoins, provides a key unlock for cheaper and quicker remittances for example,” said Edward Woodford, CEO and Founder at Zero Hash. “ CINQ by Coinstar has been able to seamlessly embed our regulatory compliant infrastructure to support new ways for cash-preferred customers to move safely and seamlessly between fiat and crypto use cases.”

Powered by Zero Hash’s identity verification service, every customer is validated before cash can be entered into the kiosk for crypto, stablecoin and fiat transactions. Additional controls include Documentary Verification and Liveness Verification before certain services may be enabled. Users can buy over 25 crypto and stablecoin assets with paper currency at Coinstar kiosks in major grocery stores across North America as well as through the CINQ by Coinstar mobile app. Users can also connect multiple bank accounts, with Zero Hash’s platform facilitating USD deposits via ACH, allowing users to hold balances in cash or crypto and easily manage their financial needs.

“Zero Hash has been an incredible partner in helping us extend our trusted services into the digital world,” said Kevin McColly, CEO of Coinstar. “Their secure and industry leading crypto and stablecoin infrastructure has allowed us to seamlessly bridge the gap between cash and cryptocurrency, making it easier for our customers to access and manage their finances.” 

There are two ways to get started buying cryptocurrency through Zero Hash at Coinstar kiosks:

Download the CINQ by Coinstar app, verify your account and visit a Coinstar kiosk with your cash. Or connect your bank account in the app and get started immediately.
Visit a Coinstar kiosk, select cryptocurrency from the options and choose CINQ by Coinstar to get started with your crypto purchase through Zero Hash. Enter your mobile number at the kiosk and last 4 SSN or Date of Birth, then download the CINQ by Coinstar app and complete your account setup.

To learn more about CINQ by Coinstar and follow along for additional product innovations, visit www.cinqwallet.com, or to find a CINQ by Coinstar enabled kiosk, visit our kiosk finder here.¹ 

1: The CINQ by Coinstar wallet is available in all 50 states. However, Zero Hash enabled Kiosks are not currently available in all states, including the state of New York.  Transactional limits may also apply.

About Zero Hash
Zero Hash is the leading crypto and stablecoin infrastructure provider that seamlessly connects fiat, crypto and stablecoins in one platform, enabling a better way to move and transfer money and value globally.

Through its embeddable infrastructure, start-ups, enterprises and Fortune 500 companies build a diverse range of use cases: cross-border payments, commerce, trading, remittance, payroll, tokenization, wallets and on and off-ramps.

Zero Hash Holdings is backed by investors, including Point72 Ventures, Bain Capital Ventures, and NYCA.

Zero Hash LLC is a FinCen-registered Money Service Business and a regulated Money Transmitter that can operate in 51 US jurisdictions. Zero Hash LLC and Zero Hash Liquidity Services LLC are licensed to engage in virtual currency business activity by the New York State Department of Financial Services. In Canada, Zero Hash LLC is registered as a Money Service Business with FINTRAC.

Zero Hash Australia Pty Ltd. is registered with AUSTRAC as a Digital Currency Exchange Provider, with DCE registered provider number DCE100804170-001.  This registration enables Zero Hash to offer its crypto services in Australia.  Zero Hash Australia Pty Ltd. is registered on the New Zealand register of financial service providers, with Financial Service Provider (FSP)  number FSP1004503.  A FSP in New Zealand is a registration and does not mean that Zero Hash Australia Pty Ltd. is licensed by a New Zealand regulator to provide crypto services.  Zero Hash Australia Pty Ltd.’s registration on the New Zealand register of financial service providers does not mean that Zero Hash Australia is subject to active regulation or oversight by a New Zealand regulator.  Zero Hash Europe B.V. is registered as a Virtual Asset Services Provider (VASP) registration by the Dutch Central Bank (Relation number: R193684).  Zero Hash Europe Sp. Zoo is registered as a VASP by the Tax Administration Chamber of Poland in Katowice (Registration number RDWW – 1212).

Connect with Zero Hash
Website | Twitter | LinkedIn | Medium

Zero Hash Contact

Shaun O’keeffe

(855) 744-7333

media@zerohash.com

Zero Hash Disclosures
Zero Hash services and product offerings, including the availability of kiosk services, may not be available in all jurisdictions. Zero Hash accounts are not subject to FDIC or SIPC protections, or any such equivalent protections that may exist outside of the US. Zero Hash’s technical support and enablement of any asset is not an endorsement of such asset and is not a recommendation to buy, sell, or hold any crypto asset. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero. Zero Hash is not registered with the SEC or FINRA. Zero Hash does not provide any securities services and is not a custodian of securities, including security tokens, on behalf of customers. 

About Coinstar, LLC
Coinstar® is a global leader in money transformation and the largest physical self-serve financial network with a digital wallet, CINQ by Coinstar. Through its digital wallet, mobile app and network of 24,000 kiosks in North America and Europe, Coinstar offers a wide range of financial services which enable users to transform their physical currency. Its reliable payment solutions offer one-stop shopping experiences at convenient kiosk locations including coin conversion to cash, NO FEE eGift cards and charitable donations as well as account transfer services powered by our bank partners. Users can also move money and transact more seamlessly in the digital world through CINQ by Coinstar with the ability to buy, sell and transfer cryptocurrencies in its initial rollout. For brand advertisers, Coinstar offers adPlanet™ Retail Media Group, which enables lead generation on the interactive kiosk screen and a digital out of home network that delivers advertising via high-definition screens on top of Coinstar kiosks at select retail and grocery locations. For more information on Coinstar, visit www.coinstar.com.

The MIL Network –

January 25, 2025

MIL-OSI Economics: A test of resolve: credible resolution following the 2023 banking turmoil

Source: Bank for International Settlements

Introduction

I would like to welcome you all to the Resolution Conference 2024, the first that has been co-organised by the BIS Financial Stability Institute (FSI), the Financial Stability Board (FSB) and the International Association of Deposit Insurers (IADI). This event is motivated by the banking turmoil in March 2023. The 18 months that have passed since those events have given time to reflect seriously on it and derive some lessons. This conference provides an opportunity to take stock, compare notes and try to identify a productive way forward.

Scene-setting

It is now commonplace to say that the March 2023 failures of several US regional banks, followed a week later by the near failure of Credit Suisse, were the first meaningful test of the international resolution framework that was put in place following the Great Financial Crisis (GFC).

The headline message is that large bank failures did not lead to a systemic crisis. Authorities managed them in an orderly manner with no ultimate loss to public funds. Creditors and shareholders bore losses. In the case of Credit Suisse, there was a significant writedown of loss-absorbing instruments. This is a noteworthy achievement, and stands in stark contrast to the GFC.

The extensive work to put in place cross-border cooperative arrangements has demonstrably strengthened the financial system. The outcomes might have been very different without the planning and coordination that took place between home and host authorities, and the understanding and trust that have been developed.

However, work remains to be done. The reports published last year by the FSB and IADI set out lessons learned for resolution and deposit insurance.¹ They include the risk of faster failures, accelerated by digital technologies; the scope of resolution planning and requirements for loss-absorbing capacity (LAC); and flexibility in resolution strategies. Other reports, including by the Basel Committee on Banking Supervision, elaborate on the supervisory shortcomings and the vulnerabilities arising from large quantities of uninsured deposits. Work on all these issues is ongoing.

In any case, I would like to concentrate my remarks on two elements of the bank resolution framework that I think must be tackled as we go forward. The first is the power to bail-in creditors as a key element of resolution strategies. The second is the need to put in place effective facilities for providing liquidity in resolution. The events of March 2023 highlighted the importance of both. They are also among the elements of a resolution framework that are most challenging to implement.

The credibility of bail-in

Bail-in powers are core to the resolution framework adopted after the GFC. Bail-in allows a systemically important bank to be recapitalised without the need to find a buyer for its business or to split up its operations, at least in the short term. Appropriate liabilities absorb losses without putting a failing bank into insolvency. Crucially, it is designed to ensure that a bank’s owners and investors, rather than depositors or taxpayers, bear the costs of resolution costs.

In practice, a bail-in is a highly complex transaction involving multiple parties, and a huge amount of work has been carried out on how to execute it. A typical bail-in would involve multiple valuations; a mechanism to write down and cancel instruments, which are likely to be traded; and the issuance of new shares to the bailed-in debt holders. The process has been mapped out in detail by resolution authorities. However, a full bail-in strategy remains untested.

Credit Suisse had a resolution strategy based on bail-in, and FINMA and key host authorities had prepared extensively to execute that strategy.

In the end, the Swiss authorities chose not to follow the resolution playbook because they had another option that achieved their objectives: a state-brokered commercial merger of Credit Suisse and UBS. Nevertheless, the contractual writedown of all the outstanding Additional Tier 1 (AT1) capital instruments issued by Credit Suisse was a key element of the transaction. The writedown extinguished liabilities amounting to CHF 16 billion from the bank’s balance sheet.²

Although the writedown was more limited than that planned under the full bail-in strategy for Credit Suisse, it demonstrates that bail-in is a core instrument in the crisis management framework. Contrary to what some commentators have feared, a substantial debt writedown is possible and can be executed without significant systemic disruption.

Nevertheless, there are a few lessons to draw from this to reinforce that bail-in is credible and feasible.

Flexible resolution toolkits

First, authorities need flexibility. Planning is essential, but it cannot be prescriptive. We cannot know with absolute confidence in advance how a failure will happen and what actions will best safeguard financial stability. Accordingly, authorities need options so that they can shape their response to the circumstances of a failure. This implies a toolkit approach under which authorities can combine the use of different tools.

The Credit Suisse transaction demonstrated that, even in the case of a global systemically important bank (G-SIB), bail-in may not be an exclusive strategy, but debt writedown could be a core element. Moreover, bail-in is not a tool exclusively for G-SIBs. For other banks, the writedown of liabilities in resolution can finance transfers of business and reduce the demands on industry-funded sources such as deposit insurance funds.

Flexibility of this kind brings operational complexities. A toolbox approach means that authorities and firms need to accommodate different options in resolution planning. Banks will need the systems and capabilities to support those options. Key aspects of resolvability such as structure and LAC may become even more complex. However, an effective toolbox approach will further reduce the residual risk that public funds will be needed in crisis management.

Loss-absorbing capacity

Second, for bail-in to be credible banks must have liabilities that can be written down with legal certainty and without systemic impact. The FSB’s TLAC standard ensures this for G-SIBs. Some jurisdictions have extended similar requirements for LAC to other banks that could be systemic in failure.

For example, the EU requirement for resolution-related LAC, the minimum requirement for own funds and eligible liabilities (MREL) – applies to all banks. The amount above the regulatory minimum required for individual banks is based on their resolution strategy. It aims to ensure that any bank that is expected to be resolved rather than wound up maintains LAC in sufficient quantity and quality to absorb losses and recapitalise it in resolution.

The US financial regulators have consulted on a proposal to require banks with $100 billion or more in assets to maintain a layer of long-term debt. This additional LAC would be used, in the event of a bank’s failure, to absorb losses and increase the resolution options. It should also foster depositor confidence among uninsured deposits.

The three US regional banks that failed in 2023 had little or no outstanding long-term debt. It has been observed elsewhere that if the proposed requirement had applied to Silicon Valley Bank and Signature Bank, they might have been resolved within the FDIC’s normal funding constraints, without a systemic risk exception being required.³

If bail-in is to help fund resolution transfers, there need to be instruments that can be written down. The amounts are lower than that needed to recapitalise the bank and finance restructuring in a “pure” bail-in. Nevertheless, calibrating those requirements may be challenging.

Moreover, meeting LAC requirements should not put banks’ legitimate business models in jeopardy. This is particularly relevant for banks that are predominantly deposit funded. A pragmatic way to alleviate the challenges for those banks is to take account of the resolution funding available from external sources, such as deposit insurance or resolution funds, when setting LAC requirements.⁴

Liquidity for crisis management

Let me turn now to liquidity for crisis management. Resolution powers can recapitalise a failing bank through bail-in. However, capital is not enough on its own. Without liquidity, the resolution will fail.

Market funding will almost certainly not be available to a bank following its resolution until counterparty confidence can be restored. Resolution frameworks therefore require a credible source of liquidity, at the necessary scale and for a sufficient period of time to allow a resolved firm to return to market-based funding.

This is recognised by the FSB, which has published two sets of guidance on funding in resolution. However, the arrangements in place vary considerably across jurisdictions and in many cases are not designed for the resolution needs of systemically important banks.

The liquidity arrangements that were needed in the case of Credit Suisse support this point. The Swiss government had been working on a public liquidity backstop, but this was not yet in place in March 2023. Accordingly, the authorities had to adopt emergency legislation to enable the Swiss National Bank (SNB) to provide a liquidity facility of up to CHF 200 billion. Part of that lending was uncollateralised and coupled with a privileged bankruptcy status for the SNB and part was backed by a guarantee from the Swiss state.

This case illustrates that ordinary central bank lending arrangements, including emergency liquidity assistance, may not be sufficient for resolution. The amount of liquidity needed by a systemically important bank will be considerable and required over an extended period. Moreover, lending may need to be secured against a wider range of assets or, in extreme circumstances, be uncollateralised. Arrangements for resolution funding must meet these needs. This implies a fiscal backstop to increase the firepower where that is needed.

A fiscal backstop might appear to introduce a risk to public funds, something that the framework for ending “too big to fail” was designed to avoid. But the risks of loss to public funds should be low. It’s worth noting that all lending in relation to Credit Suisse was repaid, and no losses were incurred by the SNB or the Swiss state under its indemnity. If resolution is effective, the bank will be viable and the borrowing should be repaid.

Concluding remarks

I will end where I began. Financial crises provide a good opportunity to identify flaws or shortcomings in the policy framework. The March 2023 banking turmoil was the most significant banking crisis since the GFC and the subsequent policy reforms. Therefore, we should grasp this opportunity to draw lessons.

Overall, authorities managed to preserve financial stability. In Switzerland, that was accomplished, despite the failure of a G-SIB, without any cost to the taxpayer. This was a remarkable achievement, and the resolution framework developed after the GFC contributed to that.

But we also need to take note of the obstacles encountered in the process. In particular, it is clear that maximising the potential of bail-in and the provision of liquidity in resolution are pending tasks that need to be addressed.

Work to do that is ongoing, and this conference is a small but significant part of that process. I am delighted that so many people have come to Basel to participate, and I expect productive discussions during the day.

MIL OSI Economics –

January 25, 2025

MIL-OSI Economics: Frank Elderson: Finance and Biodiversity Day of 16th United Nations Conference on Biological Diversity (COP16) – transcript of video recording

Source: Bank for International Settlements

The global economy and finance need nature to survive. Analysis by the ECB shows that the economy depends critically on nature: 72% of non-financial businesses in the euro area – around 4.2 million individual companies – would experience significant problems as a result of ecosystem degradation. These businesses rely on ecosystem services like fertile soils, timber and clean water. And 75% of bank loans are tied to these businesses. So, if they run into trouble, the banks that finance them will too. This interdependence underscores why the ECB made nature one of the focus areas of its climate and nature plan for 2024 and 2025. It is also why we push banks under our supervision to manage all material nature-related risks.

The ECB does not stand alone in recognising this threat. The value of nature for the economy is acknowledged by the global Network of Central Banks and Supervisors for Greening the Financial System, which has 141 members worldwide. Additionally, a recent stocktake by the Financial Stability Board showed that a growing number of policy authorities around the world are considering the potential implications of nature-related risks for financial stability.

In recognition of the vital importance of nature for the economy, international fora must ensure that nature considerations are fully integrated into regulation and supervision, alongside ongoing efforts to account for climate-related considerations. This starts with identifying exposures and vulnerabilities to nature-related risks.

While central banks and supervisors are not nature policymakers, we must take nature into account to fulfil our mandate of price stability and safe and sound banks. Otherwise, we risk failing to deliver on our mandate.

My message on this Finance and Biodiversity Day is clear: if you destroy nature, you destroy the economy. The right conditions must be established for nature – and consequently the economy – to thrive. The economy needs nature to survive. Financial stability needs nature to survive. To deliver on our mandate, we need nature to survive. And the survival of nature requires financing. Therefore, your success here in Cali is vitally important.

Thank you. Buena suerte.

MIL OSI Economics –

January 25, 2025

MIL-OSI Economics: Andrew Bailey: Michael D Gill Memorial Society Lecture

Source: Bank for International Settlements

Quite simply, I wish I was not giving this lecture today. Or, perhaps better, I wish I was giving it with Mike Gill here to participate. But, only one of those is possible due to his tragic and senseless killing. I am sure I am not alone in thinking that when these events happen to people we do not know, we find a sort of anesthetised isolation by resorting to commenting on the public policy implications in a rather dehumanised way. But when it happens to someone we knew, hugely liked and respected, who was without question a good person, then it is almost natural to be lost for words. It has taken me a long time to compose thoughts on someone to and about whom I could say so much in life.

There is an old saying that someone is a pillar of society. They are the people who support and hold society together. Well, Mike was without question a pillar of society. He was generous, kind, thoughtful and very supportive. Kristina, Sean, Brian, and Annika, as you know even better than us, he was an outstanding person.

But Mike was not a pillar of society in the sense of that term of someone who was stuck in the past, holding together a world that was lost. He was a moderniser, and that was why it was so appropriate that he served at the CFTC, which has its history but also is at one of the cutting edges of finance. Mike loved that. He talked at length about visiting farms with Chris and about the technology changing farms and agricultural markets. But he was also an enthusiast to find an appropriate treatment of cryptocurrency in derivatives markets.

The second thing about Mike and his work here at the CFTC that naturally brought us together was that he was a passionate internationalist. And he always seemed happy to visit London, and it was always good to see him there. Our international travel went further. There is a memorable, for me certainly, picture of the two of us on a boat trip in Sydney Harbour in 2019.

It wasn’t just the travel. Mike was, like Chris, an internationalist through and through. I spent time with Mike after the UK’s Brexit Referendum in 2016. I am strictly neutral on Brexit as a public official. I knew then that our job was to work out how to implement something that, let’s be honest, had not been planned. In the area of financial services, clearing was going to be probably the hardest area for us, because – and I will come back to this point – it is inherently international in many parts, and particularly the parts we do in London. I knew immediately after the Referendum that it was critical for the UK not to become isolated and certainly not isolationist. That would be the road to a very bad outcome for the City of London. We needed friends, both in deeds and words, those who would be prepared to stand by us, and put up with uncertainty while we worked out the best course. Chris, you and Mike were those people – friends when we were in some need.

Now, it is the case that, as a internationalist, Mike arrived in the world of clearing at the right time. It is a fairly esoteric activity, always important, but also often in the background. We quite like it to be humming away safely in the background. But the Global Financial crisis had emphasised that we had undervalued its importance, that the world would have been safer if we had put It more into the centre of the financial system.

But, to do that it must be done safely and soundly. Unsafe clearing would be worse than no clearing, it would amount to concentrating the risk in one unsafe house.

And so, if we are asked to list the very big financial system changes post financial crisis, we should naturally start by saying that we have put clearing at the heart of the system. Central Counterparties (CCPs) are a key to mitigating counterparty credit risk, which has become even more relevant following the crisis and, in so doing, bring significant financial stability benefits. The experience of the collapse of Lehman Brothers demonstrated that CCPs should be able to dampen the shock of a major counterparty credit failure. One of my abiding memories of the Lehman weekend was the attempt to organise an ad-hoc trade position compression exercise, to net down the positions. It wasn’t possible, and the hard lesson was that only permanent institutional structures with clearing houses at their heart can achieve the ends we desired.

But, of course, we know that CCPs, can pose significant risks to the stability of the financial system if they are not properly managed. A consequence of central clearing is that CCPs themselves become a financial network which can bring about the contagion of financial instability if they are not robustly established and operated. In line with G20 commitments following the Financial Crisis, the introduction of mandatory clearing for various classes of over-the-counter derivatives has driven an increase in the systemic importance of CCPs.

In the banking world, that tendency for banks to grow and become more globally systemic led to hostility to allowing very large banks which could be too big to fail. Clearing is different. Its not just that clearing didn’t cause the crisis, though just to be clear, it didn’t. Rather, its more than that. Up to some point, and that point can naturally be large, there are benefits of scale and scope in clearing. Yes, there is contagion risk if a CCP fails, and especially where it is large in its market, but there are real benefits of scope and scale.

And, this naturally leads to the international dimension that Mike so much emphasised. The global nature of many financial markets means that clearing is naturally a
cross-border activity. Cross-border clearing also brings significant benefits. A single CCP operating across multiple jurisdictions and currencies can provide efficiencies and reduce risk through multilateral settling of exposures across counterparties in different jurisdictions.

This puts an obligation on us as regulators of clearing houses. We have a duty to enable the safe operation of the global financial system. Public authorities have risen to this duty, supervising standards on CCPs have been strengthened and new international standards have driven the establishment of credible CCP resolution regimes. We also have a deep sense of responsibility for the impact of our actions on other countries. And, we take this very seriously, as we must. In the UK, as the regulator we are required in any exercise of our rule-making power to consider the effects of these rules on the financial stability of any country where one of our clearing houses provides services, and we must act in a way that does not favour one jurisdiction over another.

This is of course all common sense. We all recognise that the interconnectedness of global markets means that any shocks in one part of the world can quickly reverberate and cause stress elsewhere. But common sense though it is, I can tell you that it’s a lot easier to put into practice when you are working with someone like Mike Gill, who wants to get things done and is at heart an internationalist.

And, so it should be no surprise that during the period Mike was here at the CFTC, things did get done, and they continue to get done building on his legacy.

There is another feature of clearing that is distinctive. As I said earlier, by its very nature it concentrates the risks associated with the trades being cleared. That’s how and why CCPs are such crucial nodes in the financial system. But it also means that if a CCP doesn’t manage its risk well, the concentration magnifies the impact of the problem. Moreover, CCPs tend to be highly interconnected because the instruments they clear are likewise interconnected – think about the different ways to trade interest rate risk. A small number of CCPs provide most of the capacity in over the counter derivatives clearing. And, a small number of clearing members provide the majority of clearing services to clients at all of these big CCPs. These firms are also providing key services to the CCPs, such as settlement, custody and liquidity backstops.

We can take a few points from this. Clearing is quite complicated and technical as an activity. I’m going to stick my neck out and suggest that here in Washington, conversations in bars are not of the sort: “tell me how does margining in a clearing house work”. Its notoriously a dry subject, but important, hugely so. But therein lies a risk – even at international meetings there can seem to be other things to talk about, happily so, and that can lead to problems of neglect.

Except, onto the scene came Mike Gill and Chris Giancarlo. The enthusiasts had arrived. Suddenly, it seemed a pleasure to talk about clearing. The fun kids talked about clearing. The serious point is that supervising big CCPs requires deep cooperation between authorities across multiple jurisdictions. It requires cooperation not fragmentation. We knew how to do that, but it always seemed harder to put in practice than it should have done. We don’t like economic fragmentation in the world, rightly so, but somehow arguments are made that its ok to do so for clearing. No it isn’t as a matter of fact, because such a view defies the logic of how financial markets work. Supervising and regulatory cooperation is a key part of the right approach.

I want to finish by looking forwards. I think that is what Mike would want, because it was very much as I remember him. There was always something new and interesting, whether it was drones overseeing crop production or crypto assets.

The importance and role of clearing continues to grow rapidly. A few facts help to illustrate the importance of clearing. I will focus on UK-US clearing facts. The notional amount of OTC derivatives cleared by UK CCPs with US counterparties continues to be greater than that cleared with any other jurisdiction. Across the three UK CCPs, 38% of margin is derived from US clearing members, and volumes have been larger this year than last, which was also up on previous years.

Overall, one thing that lies behind this growth is a rise in non-bank financial intermediation versus bank intermediation. We should not be surprised at this. But let me go back to 2008 and the Lehman weekend for a moment. The attempt to put in place an ad-hoc trade compression process – to net down exposures – reflected in the main banks having – sloppily – built up very large derivative books, and not managed them effectively. I remember several CEOs told me at the time that it just had not occurred to them that they needed to manage these books efficiently.

Indeed, it was very clear that for quite a few, there was very little awareness of the problem that was building up. It was too easy to pile trade upon trade with little regard for the need to risk manage these books throughly.

And then the music stopped, and suddenly what had been out of sight and out of mind in the good times became a problem. Outsized books had to be managed down by banks. Today that legacy is behind us. But the scale of derivative activity has nonetheless grown much further. That growth has provided important hedging benefits, and it has enabled much larger position limits to exist, concentrated more in the non-bank sector, but inevitably with links into the banking system. The so-called basis trade is a good example of this.

These developments leave us with major puzzles. Is there a scale of activity beyond which stress sets in when it has to be unwound quite suddenly? What would be the effects of that stress? And how do we model such a fluid landscape, where stress could emerge in several places at once? Better tools of diagnosis are important here.

At the Bank of England we have designed and run something we call the System Wide Exploratory Scenario, which seeks to synthesise the effects of some severe but plausible shocks passing through the financial system. Over 50 firms have participated, as have the clearing houses that support the activity. This is not a stress test in the now quite traditional individual bank by bank sense. It is a market-wide test designed to simulate shocks – it’s a flow test, designed to find obstructions and concentrations of risks and correlated positions that might otherwise be opaque. It is I think an important step forward in testing behavioural reactions to stress including how risks might cascade across markets. And, it will give us a better answer in terms of the effectiveness of CCPs in managing market-wide risks. The results should be published by the end of the year. It’s the sort of new thing that I think Mike would have appreciated, and been enthusiastic about.

The Bank of England and the CFTC have a longstanding relationship of cooperation on CCPs. Mike added his special qualities to that relationship. Its our duty to carry his work forward, but even more so to do it in his spirit, the one we enjoyed and miss so much.

Thank you.

I would like to thank Sarah Breeden, Karen Jude, Harsh Mehta, Ruth Smith, Sam Woods, Shane Scott, Sasha Mills, Deborah Potts, Thomas Ferry, Konstantina Drakouli, Marc Ledroux, Barry King and Priya Mistry for their help in the preparation of these remarks.

MIL OSI Economics –

January 25, 2025

MIL-OSI United Nations: Deputy Secretary-General’s remarks at the 110th Meeting of the Development Committee

Source: United Nations secretary general

Chair,

Excellencies,

Let me begin by acknowledging the inspired leadership of Ajay and Kristalina, and thanking them for their support at the UN High-Level Week.

This week, our global economy has been diagnosed as suffering from low growth, and high debt.

This toxic combination further exacerbates a sustainable development crisis for millions of people across the world.

With only 17 per cent of SDG targets on track, hunger is rising, global temperatures are soaring, conflicts are spreading, and the fight for gender equality is floundering.

Financing challenges are at the heart of this crisis.

Financing gaps are growing.

Debt service is crowding out investments.

And economies are repeatedly rocked by external shocks that our financial system cannot contain.

Last month, against geopolitical tensions, Heads of States from the Global North and South agreed a Pact for the Future.

The Pact lays the foundations for a future-ready world.

It commits to deepen multilateralism to rescue the SDGs;

To guide us through a new era of technology;

to renew our approach to restoring and keeping peace;

and to accelerate reform of the international financial architecture to reflect today’s world and meet today’s challenges.

Here, the Pact urges specific actions:

To raise the voice and representation of developing countries…

To scale up development finance…

To promote sustainable borrowing, and resolve debt crises as and before they occur…

And to strengthen the global safety net.

Agreements reached at the United Nations cannot deliver change overnight. But they provide a powerful political signal for action in other fora – including this one.

Over the last two weeks, we have seen important steps forward.

The World Bank’s reduction of its equity to loan ratio frees up an additional $30 billion in lending.

And the IMF’s overhaul of its surcharge policy will lessen the penalty borne by countries most dependent on support.

We must now build on these steps, with urgency, to meet the needs and expectations of Member States and their people.

This brings me to one commitment that we must deliver this year.

IDA is the largest and most powerful instrument of financial assistance to the world’s poorest and most vulnerable countries.

That’s why the Pact for the Future urges Member States to deliver a robust 21st replenishment, to enable IDA to continue its vital work.

The Secretary-General and I wholeheartedly endorse this.

Another commitment is to seize the opportunity approved by the Fund to rechannel SDRs to acquire hybrid capital in our multilateral development banks. Champions of this initiative believe we can get this done by next month’s G20 summit.

I look forward to working with the Bank and Fund to deliver other commitments in the Pact: from reviewing the sovereign debt architecture, to improving access to concessional finance.

With next year’s Fourth International Conference on Financing for Development, we have a once-in-a-decade opportunity to transform financing for sustainable development to deliver the SDGs.

To do this for a future ready World Bank, we must work better together at the country level surging combined expertise and resources in support of our commitments to countries and their people.

Let’s work together to deliver this.

Thank you.

MIL OSI United Nations News –

January 25, 2025

MIL-OSI: MEF’s Enterprise Leadership Council Triples in Size, Driving Key Initiatives in Service Automation, Cybersecurity, and AI-Ops

Source: GlobeNewswire (MIL-OSI)

DALLAS, Oct. 29, 2024 (GLOBE NEWSWIRE) — MEF, a global industry association of network, cloud, security, and technology providers accelerating enterprise digital transformation, today announced the expansion of its Enterprise Leadership Council (ELC) from four founding members to 14 leaders representing a diverse range of industries. Formed one year ago, the ELC now includes executives from sectors such as entertainment, financial services, banking, retail, technology, healthcare, and consulting.

This expansion highlights MEF’s commitment to providing real value to enterprises exploring Network-as-a-Service (NaaS) opportunities, reinforcing its role as an independent platform where enterprises, service providers, cloud, technology companies, and other key stakeholders, collaborate on initiatives shaping the future of the digital ecosystem. With expanded enterprise participation, the organization is poised to drive impactful projects that address cloud, network, and security challenges head-on, propelling innovation across industries.

The ELC’s growth also reflects the increasing importance of enterprise perspectives in shaping MEF’s NaaS-related work. By tripling its membership in just one year, the council now offers a broader and more comprehensive view of enterprise needs across various sectors and has begun shaping strategic initiatives in areas such as service automation, cybersecurity services, compliance, and AI-Ops.

The ELC includes:

Francisco Artes, Vice President, Product & Enterprise Security, Roku
Nabil Bitar, Chief Technology Officer & Head of Network Architecture, Bloomberg LP
Maxime Bruynbroeck, Head of Network, Decathlon
Chris Carmody, Chief Technology Officer & Senior Vice President, Information Technology Division, UPMC
Daniel Foo, Head of Grabber Technology Solutions (GTS), Grab
Michael Jenkins, Strategic Negotiator, Google Enterprise Network
Amin Jerraya, Senior Vice President, Head of IT Digital Engagement and Infrastructure, Siemens Healthineers
Mark Looker, Managing Director and Head of Voice & Data Network Service, Morgan Stanley
Raleigh Mann, Senior Vice President of Technology, Williams-Sonoma, Inc.
Amo Mann, Chief Architect for Cloud and Network, Accenture
Chema San José, Head of Data & AI Architecture – CTO Global, Santander Digital Services
Neal Secher, Vice President, Head of Network Services, TD Bank
Jonathan Sheldrake, Vice President of IT – Infrastructure & Services, Burberry
Alejandro Tozer, Independent

“The expansion of the Enterprise Leadership Council marks a pivotal moment in MEF’s evolution,” said Sunil Khandekar, Chief Enterprise Development Officer, MEF. “By amplifying the enterprise voice, we’re not only responding to current industry needs, but anticipating future ones. The ELC’s diverse expertise is already shaping MEF’s NaaS initiatives, which will drive real solutions for today’s challenges and lay the foundation for tomorrow’s innovations. This level of collaboration sets a new standard for how industry associations can lead meaningful progress.”

A first initiative for the ELC is MEF’s recently launched Lifecycle Service Orchestration (LSO) Circuit Impairment & Maintenance (CIM) Service API, designed to enable service providers to automate and standardize how network circuit impairments and scheduled maintenance are communicated to enterprises. The CIM Service API will be showcased during a live demonstration at MEF’s Global NaaS Event (GNE) this week in Dallas, highlighting how enterprises can collaborate with service providers to proactively identify and address impairments and streamline network maintenance.

As ELC-led initiatives continue to advance, MEF is attracting more enterprises eager to collaborate with technology, cloud, and service providers on MEF’s independent platform. Together, they contribute to and benefit from solutions that address critical needs in cloud, network, and cybersecurity infrastructure, accelerating digital transformation across sectors.

Learn More
Enterprises interested in joining MEF and contributing to projects that directly address their needs are encouraged to visit www.mef.net for more information on membership and engagement opportunities.

About MEF
MEF is a global consortium of service, cloud, cybersecurity, and technology providers collaborating to accelerate enterprise digital transformation. It delivers standards-based frameworks, services, technologies, APIs, and certification programs to enable Network-as-a-Service (NaaS) across an automated ecosystem. MEF is the defining authority for certified Lifecycle Service Orchestration (LSO) business and operational APIs and Carrier Ethernet, SASE, SD-WAN, Zero Trust, and Security Service Edge (SSE) technologies and services. MEF’s Global NaaS Event (GNE) convenes industry leaders building and delivering the next generation of NaaS solutions. For more information about MEF, visit MEF.net and follow us on LinkedIn and Twitter.

Media Contact:
Melissa Power
MEF
pr@mef.net

The MIL Network –

January 25, 2025

MIL-OSI Economics: Trade finance resilience and low credit risk persist amid global challenges, confirms ICC

Source: International Chamber of Commerce

Headline: Trade finance resilience and low credit risk persist amid global challenges, confirms ICC

The International Chamber of Commerce (ICC), along with partners Global Credit Data (GCD) and Boston Consulting Group (BCG), has released its 2024 Trade Register Report, reaffirming the resilience of trade finance instruments and the continued low credit risk across products despite ongoing geopolitical and economic challenges .

The 2024 report confirms that trade, supply chain and export finance continue to exhibit low risk, with default rates remaining low across all regions and asset classes overall. When defaults do occur, they are generally idiosyncratic, stemming from well-known commercial, geopolitical or macroeconomic factors. As global trade faces ongoing geopolitical and economic pressures, these financial products continue to serve as vital tools for mitigating risk and maintaining liquidity, supporting the stability of trade flows.

The ICC Trade Register remains the leading, authoritative global source on credit risk and broader market dynamics in trade and supply chain finance. Its data set represents nearly a quarter of all global trade finance transactions. This 2024 edition includes extended market insights and data on global trade and trade finance. New features include insights from ICC and BCG’s practitioner survey on key trends and opportunities in trade and supply chain finance as well as a comprehensive data pack with analysis on credit risk in trade finance, available for member banks or for separate purchase through ICC.

This year, ICC and GCD demonstrated the value of high-quality, representative data in shaping trade finance regulations through their contributions to emerging regulation on Basel III capital treatment. Krishan Ramadurai, outgoing Chair of the ICC Trade Register Project, encourages more banks to participate in the project and says that more data will only reinforce the point that trade finance is a low default asset class.

The ICC Trade Register continues to look beyond credit risk, with detailed analysis on market trends and competitive dynamics across the trade and supply chain finance market.

Ravi Hanspal, Partner at BCG, said:

“Despite ongoing headwinds, we are seeing the trade and supply chain finance market continue to evolve rapidly. Banks are observing that customers are now prioritising leading service and digital capabilities more than ever, driving a step-change in investment by banks in technology to accelerate seamless trade.”

Marilyn Blattner-Hoyle, Global Head of Trade Finance and Working Capital Solutions at Swiss Reinsurance Company, said:

“ICC’s Trade Register and its deep data over many cycles is perhaps the most critical publication in the trade industry. The Register’s role in sharing quantitative and qualitative statistics underpins the power of trade as well as the stability of trade-related credit risks. It helps us to get comfortable insuring more trade with our bank clients, thus making trade and the world more resilient together. We use the Register in our actuarial assessments as well as our internal/external advocacy. We are proud to be the first insurance sponsor of the publication, affirming the important role of insurance in the global trade ecosystem.”

Christian Hausherr, Product Manager for SCF at Deutsche Bank and member of ICC Trade Register Steering Committee, said:

“In its thirteenth year after being established, the ICC Trade Register proves its relevance and importance to the trade finance community. Since then, the data approach as well as the scope of the Trade Register have been materially enhanced by the team managing the publication process on an annual basis. As of today, the Trade Register offers unique insights not only into trade finance risk, but also provides valuable macro-economic insights to its readers.”

ICC Policy Manager Tomasch Kubiak thanks member banks for their ongoing contributions.

“ICC is very appreciative of all the efforts member banks are putting in yet again for an enhanced version of the ICC Trade Register. This year’s project provides a full insight into meaningful trends in global trade finance as well as complete data collected from our members, which is now available on demand,”

he said.

Read or purchase the full ICC Trade Register Report.

MIL OSI Economics –

January 25, 2025

MIL-OSI Africa: Climate change is making it harder for people to get the care they need

Source: The Conversation – Africa – By Maria S. Floro, Professor Emerita of Economics, American University

The world is witnessing the consequences of climate change: long-lasting changes in temperature and rainfall, and more intense and frequent extreme weather events such as heat waves, hurricanes, typhoons, flooding and drought. All make it harder for families and communities to meet their care needs.

Climate change affects care systems in various ways. First, sudden illnesses and unexpected disabilities heighten the need for care. Second, it reduces access to important inputs for care such as water, food and safe shelter. Third, it can damage physical and social care infrastructures.

It can also lead to breakdowns of traditional units of caregiving such as households and communities. And it creates new situations of need with the increase in displaced person settlements and refugee camps.

Climate change creates sudden spikes in the demand for care, and serious challenges to meeting the growing need for care. All this has immediate and long lasting effects on human well-being.

The size of the current unmet care needs throughout the world is substantial. In childcare alone, about 23% of children worldwide – nearly 350 million – need childcare but do not have it. Families in low- and lower-middle-income countries are the most in need.

Similarly, as the world’s population ages rapidly, only a small proportion of the elderly who need assistance are able to use formal care (in an institution or paid homecare). Most are cared for by family members or other unpaid caregivers. Much of this unpaid care and formal care work is provided by women and girls.

Hundreds of millions of people around the world struggle to get healthcare. Expansion of access to essential health services has slowed compared to pre-2015 . And healthcare costs still create financial hardship.

Without comprehensive public and global support for care provision and the integration of care in the climate agenda, unmet care needs will only grow and inequalities will widen.

Impact

Climate change interacts with human health in complex ways. Its impact is highly uneven across populations. It depends on geographical region, income, education, gender roles, social norms, level of development, and the institutional capacity and accessibility of health systems.

In 2018-22, Africa experienced the biggest increase in the heat-related mortality rate since 2000-05. This is not surprising as the continent has more frequent health-threatening temperatures than ever before and a growing population of people older than 65.

Africa is also the region most affected by droughts in 2013-22, with 64% of its land area affected by at least one month of extreme drought per year on average. It was followed by Oceania (55% of its land area) and South and Central America (53%).

Scientific evidence also points to increases in health inequalities caused by climate change. The health effects of climate change are not uniformly felt by different population groups.

Exposure, severity of impact, and ability of individuals to recover depend on a variety of factors. Physiological characteristics, income, education, type of occupation, location, social norms and health systems are some of them.

For example, older people and young children face the greatest health risks from high temperatures.

There is also evidence of the disproportionate effect of climate change on the health of people living in poverty and those who belong to disadvantaged groups.

Women of lower social and economic status and with less education are more vulnerable to heat stress compared to women in wealthier households and with higher education or social status. They are exposed to pollution in the absence of clean cooking fuel, and to extreme heat as they walk to gather water and fuel, or do other work outdoors.

Bad sanitation in poor urban areas increases the incidence of water-borne diseases after heavy rains and floods.

Lack of access to healthcare services and the means to pay for medicines make it difficult for women and men in low-income households to recover from illness, heat strokes, and air pollution-related ailments.

Mental health problems are being attributed to climate change as well. Studies show that the loss of family or kin member, home, livelihood and a safe environment can bring about direct emotional impacts.

These adverse impacts increase the demand for caregiving and the care workload. Climate-induced health problems force family and community caregivers, particularly women, to spend more time looking after the sick and disabled, particularly frail elderly people and children.

Effect on food and water

Climate change threatens the availability of food, clean water and safe shelter. It erodes households’ and communities’ care capacity and hence societies’ ability to thrive.

Fluctuations in food supply and rising food prices as a result of environmental disasters, along with the inadequacy of government policies, underscore the mounting challenge of meeting food needs.

The threat of chronic shortage of safe drinking water has also risen. Water scarcity is an area where structural inequalities and gender disparities are laid bare.

Care for the sick and disabled, the young and the elderly is compromised when water is scarce.

Effects on providing care

Extreme weather events disrupt physical care infrastructures. It may be hard to reach hospitals, clinics, daycare centres, nursery schools and nursing homes. Some facilities may be damaged and have to close.

Another type of care system that can break down is family networks and support provided by friends and neighbours. These informal care sharing arrangements are illustrated in a study of the three large informal settlements in Nairobi.

About half (50.5%) of the sampled households reported having had a sick member in the two weeks before the survey. The majority relied on close friends and family members living nearby for care and support.

Studies have shown that climate change eventually leads to livelihood loss and resource scarcity, which can weaken social cohesion and local safety nets in affected communities.

Heightened risks and uncertainty and imminent changes in socio-economic and political conditions can also compel individuals or entire households to migrate. Migration is caused by a host of factors, but it has increasingly been a climate-related response.

The World Bank’s Groundswell Report released in 2018, for example, projected that climate change could force 216 million people to move within their countries by 2050 to avoid the slow-onset impacts of climate change.

A possible consequence of migration is the withdrawal of care support provided by the migrating extended kin, neighbours or friends, increasing the caregiving load of people left behind.

In the case of forced displacements, the traditional social networks existing in communities are disrupted entirely.

What’s needed

There are compelling reasons to believe that meeting care needs can also help mitigate the effects of climate change. And actions to meet carbon-zero goals, prevent biodiversity loss and regenerate ecosystems can reduce the care work burden that falls heavily on families, communities and women.

Any effort to tackle these grave problems should be comprehensive in scope and must be based on principles of equality, universality, and responsibility shared by all.

This article is part of a series of articles initiated through a project led by the Southern Centre for Inequality studies, in collaboration with the International Development Research Centre and a group of feminist economists and climate scientists across the world.

– Climate change is making it harder for people to get the care they need
– https://theconversation.com/climate-change-is-making-it-harder-for-people-to-get-the-care-they-need-240557

MIL OSI Africa –

January 25, 2025

MIL-OSI Africa: Brics+ could shape a new world order, but it lacks shared values and a unified identity

Source: The Conversation – Africa – By Anthoni van Nieuwkerk, Professor of International and Diplomacy Studies, Thabo Mbeki African School of Public and International Affairs, University of South Africa

The last two summits of Brics countries have raised questions about the coalition’s identity and purpose. This began to come into focus at the summit hosted by South Africa in 2023, and more acutely at the recent 2024 summit in Kazan, Russia.

At both events the alliance undertook to expand its membership. In 2023, the first five Brics members – Brazil, Russia, India, China and South Africa – invited Iran, Egypt, Ethiopia, Saudi Arabia and the United Arab Emirates to join. All bar Saudi Arabia have now done so. The 2024 summit pledged to admit 13 more, perhaps as associates or “partner countries”.

On paper, the nine-member Brics+ strikes a powerful pose. It has a combined population of about 3.5 billion, or 45% of the world’s people. Combined, its economies are worth more than US$28.5 trillion – about 28% of the global economy. With Iran, Saudi Arabia and the UAE as members, Brics+ produces about 44% of the world’s crude oil.

Based on my research and policy advice to African foreign policy decision-makers, I would argue that there are three possible interpretations of the purpose of Brics+.

A club of self-interested members – a kind of global south cooperative. What I’d label as a self-help organisation.
A reforming bloc with a more ambitious goal of improving the workings of the current global order.
A disrupter, preparing to replace the western-dominated liberal world order.

Analysing the commitments that were made at the meeting in Russia, I would argue that Brics+ sees itself more as a self-interested reformer. It represents the thinking among global south leaders about the nature of global order, and the possibilities of shaping a new order. This, as the world moves away from the financially dominant, yet declining western order (in terms of moral influence) led by the US. The move is to a multipolar order in which the east plays a leading role.

However, the ability of Brics+ to exploit such possibilities is constrained by its make-up and internal inconsistencies. These include a contested identity, incongruous values and lack of resources to convert political commitments into actionable plans.

Summit outcomes

The trend towards closer trade and financial cooperation and coordination stands out as a major achievement of the Kazan summit. Other achievements pertain to global governance and counter-terrorism.

When it comes to trade and finance, the final communiqué said the following had been agreed:

adoption of local currencies in trade and financial transactions. The Kazan Declaration notes the benefits of faster, low cost, more efficient, transparent, safe and inclusive cross-border payment instruments. The guiding principle would be minimal trade barriers and non-discriminatory access.
establishment of a cross-border payment system. The declaration encourages correspondent banking networks within Brics, and enabling settlements in local currencies in line with the Brics Cross-Border Payments Initiative. This is voluntary and nonbinding and is to be discussed further.
creation of an enhanced roles for the New Development Bank, such as promoting infrastructure and sustainable development.
a proposed Brics Grain Exchange, to improve food security through enhanced trade in agricultural commodities.

All nine Brics+ countries committed themselves to the principles of the UN Charter – peace and security, human rights, the rule of law, and development – primarily as a response to the western unilateral sanctions.

The summit emphasised that dialogue and diplomacy should prevail over conflict in, among other places, the Middle East, Sudan, Haiti and Afghanistan.

Faultlines and tensions

Despite the positive tone of the Kazan declaration, there are serious structural fault lines and tensions inherent in the architecture and behaviour of Brics+. These might limit its ambitions to be a meaningful change agent.

The members don’t even agree on the definition of Brics+. President Cyril Ramaphosa of South Africa calls it a platform. Others talk of a group (Russia’s President Vladimir Putin, India’s Prime Minister Narendra Modi) or a family (Chinese foreign ministry spokesperson Lin Jianan).

So what could it be?

Brics+ is state-driven – with civil society on the margins. It reminds one of the African Union, which pays lip service to citizens’ engagement in decision-making.

One possibility is that it will evolve into an intergovernmental organisation with a constitution that sets up its agencies, functions and purposes. Examples include the World Health Organization, the African Development Bank and the UN general assembly.

But it would need to cohere around shared values. What would they be?

Critics point out that Brics+ consists of democracies (South Africa, Brazil, India), a theocracy (Iran), monarchies (UAE, Saudi Arabia) and authoritarian dictatorships (China, Russia). For South Africa this creates a domestic headache. At the Kazan summit, its president declared Russia a friend and ally. At home, its coalition partner in the government of national unity, the Democratic Alliance, declared Ukraine as a friend and ally.

There are also marked differences over issues such as the reform of the United Nations. For example, at the recent UN Summit of the Future the consensus was for reform of the UN security council. But will China and Russia, as permanent security council members, agree to more seats, with veto rights, on the council?

As for violent conflict, humanitarian crises, corruption and crime, there is little from the Kazan summit that suggests agreement around action.

Unity of purpose

What about shared interests? A number of Brics+ members and the partner countries maintain close trade ties with the west, which regards Russia and Iran as enemies and China as a global threat.

Some, such as India and South Africa, use the foreign policy notions of strategic ambiguity or active non-alignment to mask the reality of trading with east, west, north and south.

The harsh truth of international relations is there are no permanent friends or enemies, only permanent interests. The Brics+ alliance will most likely cohere as a global south co-operative, with an innovative self-help agenda, but be reluctant to overturn the current global order from which it desires to benefit more equitably.

Trade-offs and compromises might be necessary to ensure “unity of purpose”. It’s not clear that this loose alliance is close to being able to achieve that.

– Brics+ could shape a new world order, but it lacks shared values and a unified identity
– https://theconversation.com/brics-could-shape-a-new-world-order-but-it-lacks-shared-values-and-a-unified-identity-242308

MIL OSI Africa –

January 25, 2025

MIL-OSI Global: Climate change is making it harder for people to get the care they need