Share-Based Payments

6 Months Ended

Jun. 30, 2023

Share-Based Payment Arrangement [Abstract]

Stock Compensation Expense

Stock-based compensation expense arising from our employee stock purchase plan and share-based compensation plans recognized within operating expenses in the consolidated statements of income amounted to $1.2 million and $0.6 million for the three months ended June 30, 2023 and 2022, respectively, and $6.5 million and $5.5 million for the six months ended June 30, 2023 and 2022, respectively.

Restricted Stock Awards. We grant restricted stock awards to members of our Board of Directors and restricted stock units to certain key employees. The awards vest, depending on award type and recipient, either ratably over periods of three or four years or cliff vest after four years. Vesting is accelerated in certain circumstances, including on retirement.

The following is a summary of stock award activity for the six months ended June 30, 2023:


	Shares	Weighted-Average Grant-Date Fair Value

Nonvested, January 1, 2023	141,551	$	49.83
Granted	55,205	68.03
Vested	(45,493)	50.02
Forfeited	(1,300)	50.00
Nonvested, June 30, 2023	149,963	$	56.47

The fair value of vested awards was $3.1 million and $3.0 million during the six months ended June 30, 2023 and 2022.

Stock Performance Awards. Stock performance awards are granted to executive officers and certain other key employees. The awards vest at the end of a three-year performance period. The number of common shares awarded, if any, at the end of the performance period ranges from zero to 150% of the target amount based on two performance measures: i) total shareholder return relative to a peer group and ii) return on equity. Vesting of the awards is accelerated in certain circumstances, including on retirement. The number of common shares awarded on an accelerated vesting is based either on actual performance at the end of the performance period or the number of common shares earned at target.

The grant date fair value of stock performance awards granted during the six months ended June 30, 2023 and 2022 was determined using a Monte Carlo fair value simulation model incorporating the following assumptions:


	2023		2022

Risk-free interest rate	4.15	%	1.52	%
Expected term (in years)	3		3
Expected volatility	34.00	%	32.00	%
Dividend yield	2.50	%	2.90	%

The risk-free interest rate was derived from yields on U.S. government bonds of a similar term. The expected term of the award is equal to the three-year performance period. Expected volatility was estimated based on actual historical volatility of our common stock. Dividend yield was estimated based on historical and future yield estimates.

The following is a summary of stock performance award activity for the six months ended June 30, 2023 (share amounts reflect awards at target):


	Shares	Weighted-Average Grant-Date Fair Value

Nonvested, January 1, 2023	189,800	$	45.95
Granted	59,400	61.97
Vested	(55,000)	47.79
Forfeited	—	—
Nonvested, June 30, 2023	194,200	$	50.33

The fair value of vested awards was $5.3 million and $5.1 million during the six months ended June 30, 2023 and 2022, respectively.