Stock-Based Compensation

6 Months Ended

Jun. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Based Compensation [Text Block]

5. STOCK-BASED COMPENSATION

Our stock-based compensation plans are designed to promote stock ownership in NW Natural by employees and officers. These compensation plans include a Long-Term Incentive Plan (LTIP), an Employee Stock Purchase Plan (ESPP), and a Restated Stock Option Plan. For additional information on our stock-based compensation plans, see Note 6 in the 2015 Form 10-K and the updates provided below.

Long-Term Incentive Plan

Performance Shares

LTIP performance shares incorporate a combination of market, performance, and service-based factors. During the six months ended June 30, 2016, 36,259 performance-based shares were granted under the LTIP based on target-level awards with a weighted-average grant date fair value of $50.13 per share. As of June 30, 2016, there was $3.2 million of unrecognized compensation cost from LTIP grants, which is expected to be recognized through 2018. Fair value for the market based portion of the LTIP was estimated as of the date of grant using a Monte-Carlo option pricing model based on the following assumptions:

Stock price on valuation date	$	50.15
Performance term (in years)	3.0
Quarterly dividends paid per share	$	0.4675
Expected dividend yield	3.7		%
Dividend discount factor	0.9010

Restricted Stock Units (RSUs)

During the six months ended June 30, 2016, 32,711 RSUs were granted under the LTIP with a weighted-average grant date fair value of $52.68 per share. The fair value of a RSU is equal to the closing market price of our common stock on the grant date. As of June 30, 2016, there was $3.4 million of unrecognized compensation cost from grants of RSUs, which is expected to be recognized over a period extending through 2020. Generally, the RSUs awarded are forfeitable and include a performance-based threshold as well as a vesting period of four years from the grant date. A RSU obligates us, upon vesting, to issue the RSU holder one share of common stock plus a cash payment equal to the total amount of dividends paid per share between the grant date and vesting date of that portion of the RSU.