First Northwest Bancorp faces $106M lawsuit

First Northwest Bancorp (FNWB), a Washington-based financial institution with a market capitalization of $76 million, is contending with a significant legal challenge. According to InvestingPro data, the bank currently trades at a price-to-book ratio of 0.52 and offers a dividend yield of 3.24%, though it has struggled with profitability over the last twelve months. On June 10, 2025, investment firm 3|5|2 Capital GP LLC, representing 3|5|2 Capital ABS Master Fund LP, lodged a lawsuit against First Fed Bank, a subsidiary of First Northwest Bancorp. The case, filed in the Superior Court of the State of Washington, King County, alleges that the Bank was complicit in a fraudulent scheme orchestrated by Water Station Management, LLC, which is currently embroiled in involuntary bankruptcy proceedings.

According to the lawsuit, Water Station Management and associated parties are accused of misappropriating over $100 million. The funds, raised from a bond offering, were reportedly used to repay previous investors and creditors, such as the Bank, rather than for business expansion as initially stated. 3|5|2 Capital, which claims to be an investor in the bonds, is seeking recompense for the alleged fraud. The claims include aiding and abetting fraud, conspiracy to commit fraud, unjust enrichment, and constructive trust.

The plaintiff is demanding at least $106,925,000 in compensatory damages plus interest, along with undetermined punitive damages and coverage of attorneys’ fees and costs. First Northwest Bancorp and First Fed Bank have categorically denied the allegations and plan to vigorously defend against the lawsuit. The legal challenge comes as the company’s stock has declined 14% year-to-date, with InvestingPro analysis indicating a WEAK overall financial health score.

This legal development was disclosed by First Northwest Bancorp in a Form 8-K filed with the Securities and Exchange Commission (SEC) on Friday, June 13, 2025. The information provided in the filing is not deemed to be "filed" for SEC purposes and will not be incorporated by reference into future financial statements.

Investors and stakeholders in First Northwest Bancorp, which trades under the ticker FNWB on the Nasdaq Stock Market LLC, are closely monitoring the situation as it unfolds. Despite current challenges, InvestingPro analysts expect the company to return to profitability this year, with net income growth projected. The case number for the lawsuit is 25-2-17253-8 SEA. Subscribers to InvestingPro can access 12 additional investment tips and comprehensive financial analysis for FNWB.

In other recent news, First Northwest Bancorp announced a change in its independent registered public accounting firm following a merger. The previous auditor, Moss Adams LLP, has merged with Baker Tilly US, LLP, and as a result, Baker Tilly will now serve as the independent registered public accounting firm for the company. This change was effective as of June 3, 2025, with the company’s Audit Committee approving Baker Tilly as the successor. Moss Adams’ audit reports on First Northwest Bancorp’s financial statements for the years ending December 31, 2024, and 2023 were not adverse or modified. Throughout 2023 and 2024, there were no disagreements between First Northwest Bancorp and Moss Adams regarding accounting principles or audit procedures. Additionally, no reportable events required disclosure under SEC regulations during this period. The company has included a letter from Moss Adams, now part of Baker Tilly, confirming the accuracy of these statements in its SEC filing.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.