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Stock-based Compensation

12 Months Ended

Dec. 31, 2020

Note 14. Stock-based Compensation

Overview

Under the terms of the 2020 Equity Plan, the Company has granted restricted stock units, deferred stock units and performance-based restricted stock unit awards. The Company grants restricted stock units to members of management periodically throughout the year. Each restricted stock unit is equivalent to one share of the Company’s common stock. These units have requisite service periods ranging from one to five years, subject to accelerated vesting upon eligible retirement from the Company. Recipients earn quarterly dividend equivalents on their respective units which entitle the recipients to additional units. Therefore, dividends earned each quarter compound based upon the updated unit balances.

The Company grants deferred stock units, which are restricted stock units with a deferred settlement date, to its directors and advisory directors. Each deferred stock unit is equivalent to one share of the Company’s common stock. The deferred stock units vest over a one-year period following the grant date. These units generally are subject to the same terms as restricted stock units under the Company’s 2020 Equity Plan, except that, following vesting, settlement occurs within 30 days following the earlier of separation from the board or a change in control of the Company. After vesting and prior to delivery, these units will continue to earn dividend equivalents.

The Company also grants performance-based restricted stock unit awards to members of management periodically throughout the year. Each performance-based restricted stock unit is equivalent to one share of the Company’s common stock. The number of units ultimately earned will be determined based on the achievement of market performance goals, subject to accelerated service-based vesting conditions upon eligible retirement from the Company.

The Company has outstanding stock options assumed from acquisitions.

Upon exercise or vesting/delivery, shares are expected (though not required) to be issued from treasury.

Stock Option Plan

A summary of the status of and changes in the Company's stock option awards for the year ended December 31, 2020, follows:


	2020
					Weighted-
			Weighted-		Average
			Average		Remaining
			Exercise		Contractual		Intrinsic
	Shares		Price		Life		Value
Outstanding at beginning of year		53,185	$	22.00		5.90	$	292
Exercised		(12,956)		17.45
Forfeited		—		—
Expired		(1,144)		21.35
Outstanding at end of year		39,085	$	23.53		5.88	$	—

Exercisable at end of year		39,085	$	23.53		5.88	$	—

The Company did not record any stock option compensation expense for the year ended December 31, 2020. The Company recorded stock option compensation expense, related to the converted options from First Community, totaling $0.1 million, and $0.2 million for the years ended December 31, 2019 and 2018, respectively. As of December 31, 2020, the Company did not have any unrecognized stock option expense.

Restricted Stock Unit, Deferred Stock Unit, and Performance-Based Restricted Stock Unit Awards:

A summary of the changes in the Company’s restricted stock units for the year ended December 31, 2020, is as follows:


	2020
			Weighted-
			Average
			Grant Date
	Shares		Fair Value
Non-vested at beginning of year		778,317	$	27.27
Granted		385,893		17.26
Dividend equivalents earned		41,592		18.85
Vested		(117,641)		21.38
Forfeited		(71,123)		26.34
Non-vested at end of year		1,017,038	$	23.87

A summary of the changes in the Company’s deferred stock units for the year ended December 31, 2020, is as follows:


	2020
			Weighted-
			Average
			Grant Date
	Shares		Fair Value
Non-vested at beginning of year		21,261	$	26.78
Granted		33,419		17.17
Dividend equivalents earned		4,507		18.97
Vested		(24,924)		25.68
Forfeited		—		—
Non-vested at end of year		34,263	$	17.18

Outstanding at end of year		71,044	$	24.34

On February 5, 2020, under the terms of the 2010 Equity Incentive Plan, the Company granted 3,808 restricted stock units to a member of management. The grant date fair value of the award totaled $0.1 million and will be recognized as compensation expense over the three-year requisite service period. Subsequent to the requisite service period, the awards will become 100% vested.

On July 7, 2020, under the terms of the 2020 Equity Incentive Plan, the Company granted 380,535 restricted stock units to members of management, including the Vice-Chairman of the Board. The grant date fair value of the award totaled $6.5 million and will be recognized as compensation expense over the requisite service period ranging from one year to five years. The terms of these awards included an accelerated vesting provision upon eligible retirement from the Company and added the accelerated vesting provision to all previously issued and outstanding awards. Subsequent to the requisite service period, the awards will become 100% vested. Further, the Company granted 33,419 deferred stock units to directors and advisory directors. The grant date fair value of the award totaled $0.6 million and will be recognized as compensation expense over the requisite service period of one year. Subsequent to the requisite service period, the awards will become 100% vested.

On September 21, 2020, under the terms of the 2020 Equity Incentive Plan, the Company granted 1,550 restricted stock units to a member of management. The grant date fair value of the award was insignificant and will be recognized as compensation expense over the requisite service period of five years.

During the third quarter of 2020, the Company granted a target of 15,724 performance-based restricted stock units with a maximum of 25,158 units. The actual number of units issued at the vest date could range from 0% to 160% of the initial grant, depending on attaining the market performance goal. The grant date fair value of the award is $0.3 million and will be recognized in compensation expense over the performance period ending December 31, 2022.

A description of restricted stock units and deferred stock units granted in 2019 and 2018 under the terms of the 2010 Equity Plan or the First Community 2016 Equity Incentive Plan can be found in the Company’s Annual Reports on Form 10-K for the years ended December 31, 2019 and 2018.

The Company issued 106,589 treasury shares in conjunction with the vesting of restricted stock units and settlement of deferred stock units in 2020. The difference between the number of shares issued and the number of vested units is due to shares issued under a net share settlement option.

The Company recognized $7.1 million, $3.8 million, and $3.5 million of compensation expense related to both non-vested restricted stock units and deferred stock units for the years ended December 31, 2020, 2019, and 2018, respectively. As of December 31, 2020, there was $10.9 million of total unrecognized compensation cost related to these non-vested stock awards. This cost is expected to be recognized over a period of 3.0 years.