First Northwest Bancorp is facing litigation initiated by 3|5|2 Capital, filed in the Superior Court of the State of Washington. The complaint alleges that the bank's subsidiary, First Fed Bank, was involved in a scheme with Water Station Management, LLC, which is currently undergoing involuntary bankruptcy proceedings. According to the complaint, Water Station Management misappropriated over $100 million from bond offerings to repay earlier investors and creditors, including First Fed Bank, instead of using the funds for business expansion. The claims against the bank include aiding and abetting fraud, conspiracy, unjust enrichment, and a call for a constructive trust. The lawsuit seeks compensatory damages of at least $106,925,000, along with punitive damages and legal fees. Both First Northwest Bancorp and First Fed Bank have denied the allegations and plan to defend themselves vigorously.