Stock-Based Compensation

12 Months Ended

Dec. 31, 2023

Share-Based Payment Arrangement [Abstract]

The Company recorded total stock-based compensation expense of $4.6 million, $3.0 million, and $2.3 million for the years ended December 31, 2023, 2022, and 2021, respectively, include in "Total personnel expense" on the accompanying consolidated statements of income. The Company recognized $1.1 million, $0.7 million, and $0.5 million of income tax benefits related to stock-based compensation expense in its income statement for the years ended December 31, 2023, 2022, and 2021, respectively.

At December 31, 2023, the sole equity-based compensation plan for the Company is the First Bancorp 2014 Equity Plan (the "Equity Plan"), which was approved by shareholders on May 8, 2014. As of December 31, 2023, the Equity Plan had 205,498 shares remaining available for grant.

The Equity Plan is intended to serve as a means to attract, retain, and motivate key employees and directors and to associate the interests of the Plan's participants with those of the Company and its shareholders. The Equity Plan allows for both grants of stock options and other types of equity-based compensation, including stock appreciation rights, restricted and unrestricted stock, restricted performance stock, and performance units. For the last several

years, the only equity-based compensation granted by the Company has been shares of restricted stock, as it relates to employees, and unrestricted stock as it relates to non-employee directors.

Recent restricted stock awards to employees typically include service-related vesting conditions only. Compensation expense for these grants is recorded over the requisite service periods. Upon forfeiture, any previously recognized compensation cost is reversed. Upon a change in control (as defined in the Equity Plan), unless the awards remain outstanding or substitute equivalent awards are provided, the awards become immediately vested.

Certain of the Company’s equity grants contain terms that provide for a graded vesting schedule whereby portions of the award vest in increments over the requisite service period. The Company recognizes compensation expense for awards with graded vesting schedules on a straight-line basis over the requisite service period for each incremental award. Compensation expense is based on the estimated number of stock awards that will ultimately vest. Over the past five years, there have been insignificant amounts of forfeitures, and therefore the Company assumes that all awards granted with service conditions will vest. The Company recognizes forfeitures as they occur.

In addition to employee equity awards, the Company's practice is to grant unrestricted common shares to each non-employee director (currently 14 in total) in June of each year. These grants were each valued at approximately $37,500 in 2023 and $32,000 in 2022. Compensation expense associated with these director awards is recognized on the date of the award since there are no vesting conditions. On June 1, 2023, the Company granted 17,094 shares of common stock to non-employee directors (1,221 shares per director), at a fair market value of $30.69 per share, which was the closing price of the Company’s common stock on that date, which resulted in $525,000 in expense. On June 1, 2022, the Company granted 10,344 shares of common stock to non-employee directors (862 shares per director), at a fair market value of $37.12 per share, which was the closing price of the Company’s common stock on that date, which resulted in $384,000 in expense. The expense associated with director grants is classified as "Other operating expense" in the consolidated statements of income.

The following table presents information regarding the activity during 2021, 2022, and 2023 related to the Company’s outstanding restricted stock:


	Long-Term Restricted Stock
	Shares	Weighted Average Grant Date Fair Value
Nonvested at January 1, 2021	172,105	$	33.80
Granted during the period	104,414	40.56
Vested during the period	(63,369)	39.82
Forfeited or expired during the period	(6,819)	37.32

Nonvested at December 31, 2021	206,331	35.25
Granted during the period	95,960	38.09
Vested during the period	(70,110)	36.69
Forfeited or expired during the period	(9,169)	32.62

Nonvested at December 31, 2022	223,012	36.14
Granted during the period	143,380	37.08
Vested during the period	(74,310)	29.43
Forfeited or expired during the period	(791)	37.88

Nonvested at December 31, 2023	291,291	38.01

The total fair value of shares vested during 2023, 2022 and 2021 was $2.2 million, $2.6 million and $2.5 million, respectively. Total unrecognized compensation expense as of December 31, 2023 amounted to $5.0 million with a weighted average remaining term of 1.8 years. The Company expects to record $3.3 million of compensation expense in the next twelve months related to these nonvested awards that are outstanding at December 31, 2023.

As discussed in Note 2, in conjunction with the GrandSouth acquisition, GrandSouth common stock options outstanding at January 1, 2023 became fully vested under the change in control provisions in the GrandSouth option plans and were converted into replacement options to acquire 0.91 shares of the Company's common stock. The Company issues new shares of common stock when options are exercised.

Stock option activity and related information is presented below as of and for the periods indicated:


	Options Outstanding
	Number of Shares	Weighted- Average Exercise Price	Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (thousands)
Balance at January 1, 2023	—	—
Replacement options issued in conjunction with acquisition of GrandSouth	542,345	20.14
Exercised during the period	(236,760)	19.09
Forfeited or expired during the period	—	—

Outstanding at December 31, 2023	305,585	20.95	5.74	$	4,907

Exercisable at December 31, 2023	305,585	20.95	5.74	$	4,907

Stock options outstanding are summarized as follows as of December 31, 2023:


Shares	Range	Weighted Average Price	Weighted Average Remaining Life in Years
77,857	$13.79 - 18.18	15.69	3.51
120,500	$18.19	18.19	5.48
107,228	$18.20 - 31.32	27.88	7.64
305,585		20.95	5.74

The fair value of the replacement options issued in conjunction with the GrandSouth acquisition as of January 1, 2023 was measured using the Black-Scholes option pricing model. The following table illustrates the assumptions for the Black-Scholes model used in determining the fair value of options granted:


	For the twelve months ended
	December 31, 2023
Fair value per option, weighted average	$	24.85
Expected life (years)	1.4 - 4.7
Expected stock price volatility, weighted average	46.39		%
Expected dividend yield	2.05		%
Risk-free interest rate, weighted average	4.18		%
Expected forfeiture rate	—		%

The expected life is based on historical exercises and forfeitures experience of the grantees. The volatility is based on historical price volatility. The risk-free interest rate is based on a U.S. Treasury instrument with a life that is similar to the expected life of the option grant.

At December 31, 2023, the Company had no unrecognized compensation expense related to stock options. All unexercised options expire ten years after the applicable original grant dates under the GrandSouth stock option plan.