XML 39 R23.htm IDEA: XBRL DOCUMENT

Note 11 - Benefit Plans

12 Months Ended

Dec. 31, 2025

Compensation and Employee Benefit Plans [Text Block]

Note 11 - Benefit Plans

Single-employer Pension Plan

Effective March 23, 2021, the Company established the First Federal Defined Benefit Plan ("Bank DB Plan"), a single-employer plan. On March 23, 2021, all assets and liabilities were transferred from the prior Pentegra Defined Benefit Plan for Financial Institutions to the newly established Bank DB Plan.

The Bank DB Plan is a defined benefit pension plan covering current and former employees. Benefits available under the plan are frozen. As a result, no new participants are allowed. The plan provides defined benefits based on years of service and final average salary prior to the freeze. The measurement date for this plan is December 31.

A related prior service cost of $1.2 million and $1.3 million, net of tax, was included in accumulated other comprehensive loss on the Company's balance sheet at December 31, 2025 and 2024, respectively. The prior service cost is expected to be amortized over 15 years.

The following table summarizes the changes in benefit obligations and plan assets for the periods shown:

(dollars in thousands)	December 31, 2025			December 31, 2024
Change in fair value of plan assets
Fair value at beginning of period	$	10,217		$	10,923
Actual return on plan assets		801			38
Company contributions		—			27
Benefits paid		(843	)		(771	)
Fair value at end of period	$	10,175		$	10,217

Change in projected benefit obligation
Projected benefit obligation at beginning of period	$	9,957		$	10,398
Interest cost		487			461
Actuarial loss		267			(131	)
Benefits paid		(843	)		(771	)
Projected benefit obligation at end of period	$	9,868		$	9,957

Funded status at period end	$	307		$	260

Amounts recognized on Consolidated Balance Sheet
Other assets	$	307		$	260
Accumulated other comprehensive loss		(1,571	)		(1,788	)
Net amount recognized	$	1,878		$	2,048

Other changes recognized in other comprehensive income (loss)
Net (gain) loss	$	(126	)	$	252
Amortization of prior service cost credit		(150	)		(150	)
Net periodic benefit cost (income)	$	(276	)	$	102

Weighted-average assumptions used to determine projected obligation
Discount rate		5.35	%		5.45	%
Rate of compensation increase		N/A			N/A

The Company does not expect to make a contribution to the Bank DB Plan in 2026. It is the policy of the Company to fund no less than the minimum funding amount required by ERISA. The following table sets forth the components of net periodic benefit cost and other amounts recognized in accumulated other comprehensive loss for the periods shown:

	For the Year Ended December 31,
(dollars in thousands)	2025			2024
Components of net periodic benefit cost
Interest cost	$	487		$	461
Expected return on plan assets		(408	)		(421	)
Amortization of prior service cost		150			150
Net periodic benefit cost	$	229		$	190

Weighted-average assumptions used to determine net cost
Discount rate		5.45	%		4.90	%
Expected long-term return on plan assets		5.60	%		5.30	%
Rate of compensation increase		N/A			N/A

The expected long-term return on plan assets assumption was developed as a weighted average rate based on the target asset allocation of the plan and the Long-Term Capital Market Assumptions for the corresponding fiscal year end. Gains and losses are recognized in accordance with the standard amortization provisions of the applicable accounting guidance. The Company's net periodic benefit income recognized for the Bank DB Plan is sensitive to the discount rate and expected return on plan assets.

From initial funding in the first quarter of 2021 through December 31, 2025, the Bank DB Plan assets have been invested primarily in fixed income and large U.S. equity funds, with additional investments in international equity, real estate, and small/mid-range U.S. equity funds. The target allocations for 2026 by asset category are presented in the table below.

Asset Category
Fixed Income			80% - 100%
U.S. Equities			0% - 30%
Non-U.S. Equities			0% - 20%
Real Assets			0% - 10%

Benefit payments projected to be made from the Bank DB Plan are as follows:

(dollars in thousands)	December 31, 2025
Estimated future benefit payments
2026	$	2,110
2027		730
2028		670
2029		620
2030		880
Years 2031-2035		3,340
Thereafter		1,518
Projected benefit obligation	$	9,868

Fair value measurements, including descriptions of Level 1, 2, and 3 of the fair value hierarchy and the valuation methods employed by the Company are provided in Note 15 - Fair Value Measurements. Plan investment assets measured at fair value by level and in total are as follows:

	December 31, 2025
	Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
(dollars in thousands)	(Level 1)		(Level 2)		(Level 3)		Total
Large U.S. Equity	$	1,584	$	—	$	—	$	1,584
Small/Mid U.S. Equity		139		—		—		139
International Equity		440		—		—		440
Fixed Income		8,012		—		—		8,012
Total DB plan investments	$	10,175	$	—	$	—	$	10,175

	December 31, 2024
	Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
(dollars in thousands)	(Level 1)		(Level 2)		(Level 3)		Total
Large U.S. Equity	$	1,516	$	—	$	—	$	1,516
Small/Mid U.S. Equity		130		—		—		130
International Equity		410		—		—		410
Fixed Income		8,161		—		—		8,161
Total DB plan investments	$	10,217	$	—	$	—	$	10,217

Nonqualified Deferred Compensation Plan

First Fed also sponsors a nonqualified Deferred Compensation Plan ("DCP") for members of the Board of Directors and eligible officer-level employees. This plan, approved by the Board on February 1, 2012, allows eligible participants to defer and invest a portion of their earnings in a selection of investment options identified in the plan at no expense to First Fed. All deferrals are remitted to Principal, the Plan Administrator, and held in a trust. The aggregate balance held in trust at December 31, 2025, was $1.4 million. The Company's obligation to make payments under the DCP is a general obligation of the Company and is to be paid from the Company's general assets. As such, participants are general unsecured creditors of the Company with respect to their participation of the plan. The market value of the DCP assets is recorded in "other assets" and the related liability to participants is recorded in "other liabilities" on the Balance Sheet.

The Company also has agreements with certain key officers that provide for potential payments upon retirement, disability, termination, change in control and death.

401(k) Plan

First Fed maintains a single-employer 401(k) plan. Employees may contribute up to 100% of their pre-tax compensation to the 401(k) plan, subject to regulatory limits. First Fed provides matching funds of 50% limited to the first 6% of salary contributed. First Fed's contributions were $554,000 and $543,000 during the years ended December 31, 2025 and December 31, 2024, respectively.

Employee Stock Ownership Plan

In connection with the mutual to stock conversion, the Company established an ESOP for eligible employees of the Company and the Bank. Employees of the Company who have been credited with at least 1,000 hours of service during a 12-month period are eligible to participate in the ESOP.

Pursuant to the Plan, the ESOP purchased in the open market 8% of the common stock originally issued in the mutual to stock conversion. As of December 31, 2025, 1,048,029 shares, or 100% of the total, have been purchased in the open market at an average price of $12.45 per share with funds borrowed from First Northwest. The Bank will make contributions to the ESOP in amounts necessary to amortize the ESOP loan payable to First Northwest over a period of 20 years, bearing estimated interest at 2.46%.

Shares purchased by the ESOP with the loan proceeds are held in a suspense account and allocated to ESOP participants on a pro rata basis as principal and interest payments are made by the ESOP to the Company. The loan is secured by shares purchased with the loan proceeds and will be repaid by the ESOP with funds from the Bank's discretionary contributions to the ESOP and earnings on the ESOP assets. Annual principal and interest payments of $835,000 and $837,000 were made by the ESOP during the years ended December 31, 2025 and 2024, respectively.

As shares are committed to be released from collateral, the Company reports compensation expense equal to the average daily market prices of the shares and the shares become outstanding for EPS computations. The compensation expense is accrued monthly throughout the year. Dividends on allocated and unallocated ESOP shares will be recorded as a reduction of debt and accrued interest.

Compensation expense related to the ESOP for the years ended December 31, 2025 and 2024, was $376,000 and $353,000, respectively.

Shares issued to the ESOP as of the dates indicated are as follows:

(dollars in thousands, except share data)	December 31, 2025		December 31, 2024
Allocated shares		545,097		492,208
Committed-to-be-released shares		26,442		26,442
Unallocated shares		476,490		529,379
Total ESOP shares issued		1,048,029		1,048,029
Fair value of unallocated shares	$	4,469	$	5,400

Stock-based Compensation

In May 2020, the Company's shareholders approved the First Northwest Bancorp 2020 Equity Incentive Plan ("2020 EIP"), which provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock shares or restricted stock units, and performance share awards to eligible participants through May 2030. The cost of awards under the 2020 EIP generally is based on the fair value of the awards on their grant date. The maximum number of shares that may be utilized for awards under the 2020 EIP is 520,000. At December 31, 2025, there were 95,789 total shares available for grant under the 2020 EIP, all of which are available to be granted as restricted shares, performance shares, options or stock appreciation rights.

As a result of the approval of the 2020 EIP, the First Northwest Bancorp 2015 Equity Incentive Plan (the "2015 EIP") was frozen and no additional awards will be made. As of December 31, 2025, there were no shares available for grant under the 2015 EIP. The final shares granted under the 2015 EIP vested in the second quarter of 2025.

There were 151,650 and 81,181 shares of restricted stock awarded, respectively, during the years ended December 31, 2025 and 2024. Restricted share awards vest ratably over periods ranging from one to five years from the date of grant provided the eligible participant remains in service to the Company. The Company recognizes compensation expense for the restricted stock awards based on the fair value of the shares at the grant date amortized over the vesting period.

In addition, there were 33,251 and no performance shares awarded, respectively, during the years ended December 31, 2025 and 2024. Performance share awards vest in accordance with the terms outlined in each award agreement. The Company recognizes compensation expense for the performance share awards based on the fair value of the shares at the grant date amortized over the performance period.

For the years ended December 31, 2025 and 2024, total stock compensation expense for the 2015 and 2020 EIPs was $733,000 and $957,000, respectively.

Included in the above stock compensation expense for the years ended December 31, 2025 and 2024, was directors' stock compensation of $248,000 and $242,000, respectively.

The following tables provide a summary of changes in non-vested restricted awards for the year ended December 31, 2025:

	Shares			Weighted-Average Grant Date Fair Value
Non-vested at January 1, 2025		97,064		$	14.46
Granted		184,901			9.43
Vested		(49,544	)		14.65
Canceled ⁽¹⁾		(11,221	)		14.65
Forfeited		(59,103	)		12.06
Non-vested at December 31, 2025		162,097			9.53

(1) A surrender of vested stock awards by a participant surrendering the number of shares valued at the current stock price at the vesting date to cover the participant's tax obligation of the vested shares. The surrendered shares are canceled and are unavailable for reissue.

As of December 31, 2025, there was $1.1 million of total unrecognized compensation cost related to non-vested restricted shares. The cost is expected to be recognized over the remaining weighted-average vesting period which is approximately 2.20 years.