Employee Benefits

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

Employee Stock Ownership Plan

In connection with the Conversion, the Company established an ESOP for eligible employees of the Company and the Bank. Employees of the Company and the Bank 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 shares in the open market 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%. 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. No principal or interest was paid by the ESOP during the three months ended March 31, 2020.

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 ESOP shares are recorded as a reduction of retained earnings; dividends on unallocated ESOP shares are recorded as a reduction of debt and accrued interest.

Compensation expense related to the ESOP for the three months ended March 31, 2020 and 2019, was $151,000 and $207,000, respectively.

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



	March 31, 2020		December 31, 2019
	(Dollars in thousands)
Allocated shares	253,987		253,987
Committed to be released shares	13,257		—
Unallocated shares	780,785		794,042

Total ESOP shares issued	1,048,029		1,048,029

Fair value of unallocated shares	$	8,487	$	14,396

Stock-based Compensation

On November 16, 2015, the Company's shareholders approved the First Northwest Bancorp 2015 Equity Incentive Plan (the "2015 EIP"), which provides for the grant of incentive stock options, non-qualified stock options, restricted stock and restricted stock units to eligible participants. The cost of awards under the 2015 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 2015 EIP is 1,834,050. The 2015 EIP provides for the use of authorized but unissued shares or shares that have been reacquired by First Northwest to fund share-based awards. At March 31, 2020, there were 1,322,050 total shares available for grant under the 2015 EIP, including 12,014 shares available to be granted as restricted stock.

During the three months ended March 31, 2020, 35,100 shares of restricted stock were awarded and no stock options were granted. There were no shares of restricted stock awarded during the three and three months ended March 31, 2019. Awarded shares of restricted stock vest ratably over 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 five years.

For the three months ended March 31, 2020 and 2019, total compensation expense for the 2015 EIP was $304,000 and $283,000, respectively.

Included in the above compensation expense for the three months ended March 31, 2020 and 2019, directors' compensation was $85,000 and $85,000, respectively.

The following table provide a summary of changes in non-vested restricted stock awards for the period shown:



	For the Three Months Ended
	March 31, 2020
	Shares		Weighted-Average Grant Date Fair Value
Non-vested at January 1, 2020	264,300		$	14.60
Granted	35,100		16.22
Forfeited	(45,500	)	13.31

Non-vested at March 31, 2020	253,900		15.05

As of March 31, 2020, there was $3.1 million of total unrecognized compensation cost related to non-vested shares granted as restricted stock awards. The cost is expected to be recognized over the remaining weighted-average vesting period of approximately 3.46 years.

Subsequent to quarter-end, on May 5, 2020, the Company's shareholders approved the First Northwest Bancorp 2020 Equity Incentive Plan (the "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. 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. The 2020 EIP provides for the use of authorized but unissued shares or shares that have been reacquired by First Northwest to fund share-based awards. The 2020 EIP is separate from the 2015 EIP. The adoption of the 2020 EIP neither affects nor is affected by the continued existence of the 2015 EIP, except that after May 5, 2020, no further awards will be granted under the 2015 EIP.