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Share-Based Compensation

12 Months Ended

Dec. 31, 2021

Note 19—Share-Based Compensation

Compensation cost is recognized for stock options and restricted stock awards issued to employees. Compensation cost is measured as the fair value of these awards on their date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used as the fair value of restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period for stock option awards and as the restriction period for restricted stock awards. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.

Our 2004, 2012, 2019 and 2020 share-based compensation plans are long-term retention plans intended to attract, retain, and provide incentives for key employees and non-employee directors in the form of incentive and non-qualified stock options, restricted stock, and restricted stock units (“RSUs”). Our 2020 plan was adopted by our shareholders at our annual meeting on October 29, 2020. The Company also assumed the obligations of CSFL under various equity incentive plans pursuant to the merger of CSFL on June 7, 2020.

Stock Options

With the exception of non-qualified stock options granted to directors under the 2004 and 2012 plans, which in some cases may be exercised at any time prior to expiration and in some other cases may be exercised at intervals less than a year following the grant date, incentive stock options granted under our 2004, 2012, 2019 and 2020 plans may not be exercised in whole or in part within a year following the date of the grant, as these incentive stock options become exercisable in 25% increments pro ratably over the four-year period following the grant date. The options are granted at an exercise price at least equal to the fair value of the common stock at the date of grant and expire ten years from the date of grant. No options were granted under the 2004, 2012 or 2019 plans after January 26, 2012, February 1, 2019, and October 29, 2020, respectively, and the plans are closed other than for any options still unexercised and outstanding. The 2020 plan is the only plan from which new share-based compensation grants may be issued. It is the Company’s policy to grant options out of the 2,072,245 shares registered under the 2020 plan.

Activity in the Company’s stock option plans is summarized in the following table. All information has been retroactively adjusted for stock dividends and stock splits.


	Year Ended December 31,
	2021			2020			2019
		Weighted			Weighted			Weighted
		Average			Average			Average
		Exercise			Exercise			Exercise
	Shares	Price		Shares	Price		Shares	Price
Outstanding at January 1, 2021	256,425	$	59.01	176,888	$	67.14	213,866	$	61.28
Assumed stock options and warrants from CSFL merger	—		—	136,831		37.85	—		—
Exercised	(64,075)		45.35	(52,331)		32.12	(36,978)		33.26
Forfeited	(6,250)		85.42	(4,963)		48.89	—		—
Expired	(975)		(24.37)	—			—
Outstanding at December 31, 2021	185,125		63.03	256,425		59.01	176,888		67.14
Exercisable at December 31, 2021	185,125		63.03	256,425		59.01	131,216		60.12
Weighted-average fair value of options granted during the year		$	—		$	—		$	28.01

The aggregate intrinsic value of 185,125, 256,425, and 176,888 stock options outstanding at December 31, 2021, 2020, and 2019 was $3.8 million, $4.6 million, and $3.7 million, respectively. The aggregate intrinsic value of 185,125, 256,425, and 131,216 stock options exercisable at December 31, 2021, 2020, and 2019 was $3.8 million, $4.6 million, and $3.6 million, respectively. The aggregate intrinsic value of 64,075, 52,331, and 36,978 stock options exercised for the years ended December 31, 2021, 2020, and 2019 was $2.3 million, $2.0 million and $1.4 million, respectively.

Information pertaining to options outstanding at December 31, 2021, is as follows:

Options Outstanding

Options Exercisable

Weighted

Average

Remaining

Weighted

Remaining

Range of

Number

Contractual

Average

Number

Average

Contractual

Exercise Prices

Outstanding

Life

Exercise Price

Outstanding

Exercise Price

Life

21.66

40.00

19,345

1.7

years

32.23

19,345

32.23

1.7

years

40.01

55.00

56,754

4.2

years

44.70

56,754

44.70

4.2

years

55.01

70.00

51,857

3.1

years

63.62

51,857

63.62

3.1

years

70.01

85.00

—

years

—

0.00

—

years

85.01

91.35

57,169

5.6

years

91.12

57,169

91.12

5.6

years

185,125

4.0

years

63.03

185,125

63.03

4.0

years

The fair value of options is estimated at the date of grant using the Black-Scholes option pricing model and expensed over the options’ vesting periods. We have not granted any stock options for the years ended December 31, 2021, 2020 and 2019, and therefore, we have not used the Black-Scholes option pricing model to fair value options.

As of December 31, 2021 and 2020, there were no unrecognized compensation costs related to non-vested stock option grants under the plans. As of December 31, 2019, there was $720,000 of total unrecognized compensation cost related to non-vested stock option grants under the plans. The total fair value of shares vested during the years ended December 31, 2021, 2020, and 2019 was approximately $0, $1.4 million, and $799,000, respectively. Compensation expense of $0, $720,000, and $641,000 was recorded in 2021, 2020, and 2019, respectively. Of the expense in 2020,

approximately $481,000 was recognized in June 2020 due to the acceleration of vesting of stock options through the merger with CSFL.

Restricted Stock

We, from time-to-time, grant shares of restricted stock to key employees and non-employee directors. These awards help align the interests of these employees and directors with the interests of our shareholders by providing economic value directly related to increases in the value of our stock. The value of the stock awarded is established as the fair market value of the stock at the time of the grant. We recognize expenses, equal to the total value of such awards, ratably over the vesting period of the stock grants. Restricted stock grants to employees typically “cliff vest” after four years. Grants to non-employee directors typically vest within a 12-month period.

All restricted stock agreements are conditioned upon continued employment, or service in the case of directors. Termination of employment prior to a vesting date, as described below, would terminate any interest in non-vested shares. Prior to vesting of the shares, as long as employed by the Company, the key employees and non-employee directors will have the right to vote such shares and to receive dividends paid with respect to such shares. All restricted shares will fully vest in the event of change in control of the Company or upon the death of the recipient. Due to the merger between the Company and CSFL effective June 7, 2020, a total of 29,303 restricted stock awards became fully vested.

Non-vested restricted stock for the year ended December 31, 2021 is summarized in the following table. All information has been retroactively adjusted for stock dividends and stock splits.


		Weighted-
		Average
		Grant-Date
Restricted Stock	Shares	Fair Value
Nonvested at January 1, 2021	11,004	$	59.42
Vested	(7,938)		56.43
Nonvested at December 31, 2021	3,066	$	67.31

The Company granted 0, 9,145, and 8,934 shares for the years ended December 31, 2021, 2020, and 2019, respectively. The weighted-average- grant-date fair value of restricted shares granted in 2021, 2020, and 2019 was $0, $55.96, and $73.34, respectively. Compensation expense of $370,000, $1.5 million, and $1.7 million was recorded in 2021, 2020, and 2019, respectively. Of the expense in 2020, approximately $704,000 was recognized in June 2020 due to the acceleration of vesting of restricted stock awards through the merger with CSFL.

The vesting schedule of these shares as of December 31, 2021 is as follows:


		Shares
2022		750
2023		750
2024		1,566
		3,066

As of December 31, 2021, there was $166,000 of total unrecognized compensation cost related to non-vested restricted stock granted under the plans. The cost is expected to be recognized over a weighted-average period of 2.65 years as of December 31, 2021. The total fair value of shares vested during the years ended December 31, 2021, 2020 and 2019 was approximately $448,000, $4.6 million, and $3.0 million, respectively.

Restricted Stock Units (“RSU”)

We, from time-to-time, also grant performance RSUs and time-vested RSUs to key employees. These awards help align the interests of these employees with the interests of our shareholders by providing economic value directly related to our performance. Some performance RSU grants contain a three-year performance period while others contain a one to two-year performance period and a time-vested requirement (generally two to four years from the grant date). We communicate threshold, target, and maximum performance RSU awards and performance targets to the applicable key employees at the beginning of a performance period. Due to the merger with CSFL, all legacy and assumed performance based restricted stock units converted to a time-vesting requirement. With respect to some long-term

incentive awards, dividend equivalents are accrued at the same rate as cash dividends paid for each share of the Company’s common stock during the performance or time-vested period, and subsequently paid when the shares are issued on the vesting or settlement date. The value of the RSUs awarded is established as the fair market value of the stock at the time of the grant. We recognize expenses on a straight-line basis typically over the performance and vesting/or time-vesting periods based upon the probable performance target, as applicable, that will be met. For the year ended December 31, 2021, we accrued for 100.0% of the RSUs granted. Due to the merger between the Company and CSFL effective June 7, 2020, a total of 242,018 restricted stock units became fully vested in 2020.

Nonvested RSUs for the year ended December 31, 2021 is summarized in the following table.


		Weighted-
		Average
		Grant-Date
Restricted Stock Units	Shares	Fair Value
Outstanding at January 1, 2021	750,821	$	60.88
Granted	301,230		81.14
Vested	(93,081)		64.66
Forfeited	(10,757)		64.20
Outstanding at December 31, 2021	948,213	$	67.01

The nonvested shares of 948,213 at December 31, 2021 includes 25,937 shares that have fully vested but are subject to a two-year holding period, which commenced at the end of their respective vesting period. These vested shares will be released and issued into shares of common stock at the end of their respective two-year holding period, the last of which will end by December 31, 2023. The Company granted 301,230, 382,205, and 159,521 shares for the year ended December 31, 2021, 2020, and 2019, respectively. The weighted-average grant-date fair value of restricted stock units granted in 2021 was $81.14. Compensation expense of $25.2 million, $21.0 million, and $6.4 million was recorded in 2021, 2020, and 2019, respectively. Of the expense in 2020, approximately $7.5 million was recognized in June 2020 due to the acceleration of vesting of restricted stock units through the merger with CSFL.

As of December 31, 2021, there was $26.2 million of total unrecognized compensation cost related to nonvested RSUs granted under the plan. This cost is expected to be recognized over a weighted-average period of 1.7 years as of December 31, 2021. The total fair value of restricted stock units that vested during the years ended December 31, 2021, 2020, and 2019 was approximately $6.0 million, $23.6 million, and $5.8 million, respectively.

Employee Stock Purchase Plan

The Company previously registered 363,825 shares of common stock in connection with the establishment of an Employee Stock Purchase Plan. At the annual shareholders meeting on October 29, 2020, a proposal was adopted to increase the shares of common stock that may be issued under the plan by up to 1,400,000 shares. The plan is available to all employees who have attained age 21 and completed six months of service. The Company currently has approximately 1.4 million shares available for issuances under the plan. The price at which common stock may be purchased for each quarterly option period is the lesser of 95% of the common stock’s fair value on either the first or last day of the quarter.

The 2002 Employee Stock Purchase Plan permits eligible employees to purchase Company stock at a discounted price. Beginning July 1, 2009, the 15% discount was reduced to 5%. Employees purchased 33,013, 32,476 and 21,100 shares in 2021, 2020 and 2019, respectively, through the Employee Stock Purchase Plan. The Company recognized $126,000, $81,000 and $75,000 in share-based compensation expense for the years ended December 31, 2021, 2020 and 2019, respectively.