XML 31 R22.htm IDEA: XBRL DOCUMENT

Stock-based Compensation and Benefits

9 Months Ended

Sep. 30, 2023

Stock-based Compensation and Benefits

Stock-based Compensation and Benefits

Note 12 Stock-based Compensation and Benefits

The Company provides stock-based compensation in accordance with shareholder-approved plans. On May 9, 2023, shareholders approved the 2023 Omnibus Incentive Plan (the "2023 Plan"). The 2023 Plan replaces the 2014 Omnibus Incentive Plan (the "Prior Plan"), pursuant to which the Company granted equity awards prior to the approval of the 2023 Plan. Pursuant to the 2023 Plan, the Compensation Committee of the Board of Directors has the authority to grant, from time to time, awards of stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, other stock-based awards, or any combination thereof to eligible persons.

Stock options

The Company issues stock options, which are primarily time-vesting with 1/3 vesting on each of the first, second and third anniversary of the date of grant or date of hire. The expense associated with the awarded stock options was measured at fair value using a Black-Scholes option-pricing model. The outstanding option awards vest on a graded basis over 1-4 years of continuous service and have 10-year contractual terms.

The following table summarizes stock option activity for the nine months ended September 30, 2023:


							Weighted
							average
				Weighted			remaining
				average			contractual		Aggregate
				exercise			term in		intrinsic
		Options		price			years		value
Outstanding at December 31, 2022		717,088		$	29.79		5.98		$	8,850
Granted		107,530			33.46
Exercised		(8,683)			20.36
Forfeited		(4,690)			35.57
Outstanding at September 30, 2023		811,245			30.34		5.73			2,571
Options exercisable at September 30, 2023		623,666			28.41		4.76			2,569
Options vested and expected to vest		791,825			30.20		5.65			2,571

Stock option expense is a component of salaries and benefits in the consolidated statements of operations and totaled $0.1 million and $0.8 million for the three and nine months ended September 30, 2023, respectively, and $0.1 million and $0.6 million for the three and nine months ended September 30, 2022, respectively. At September 30, 2023, there was $0.6 million of total unrecognized compensation cost related to non-vested stock options granted under the plans. The cost is expected to be recognized over a weighted average period of 2.2 years.

Restricted stock awards

The Company issues primarily time-based restricted stock awards that vest over a range of a 1-3 year period. Restricted stock with time-based vesting was valued at the fair value of the shares on the date of grant as they are assumed to be held beyond the vesting period.

Performance stock units

The Company grants performance stock units which represent initial target awards and do not reflect potential increases or decreases resulting from the final performance results, which are to be determined at the end of the three-year performance period (vesting date). The actual number of shares to be awarded at the end of the performance period will range from 0% - 150% of the initial target awards. Sixty percent of the award is based on the Company’s cumulative earnings per share (EPS target) during the performance period, and forty percent of the award is based on the Company’s cumulative total shareholder return (TSR target), or TSR, during the performance period. On the vesting date, the Company’s TSR will be compared to the respective TSRs of the companies comprising the KBW Regional Index at the grant date to determine the shares awarded. The fair value of the EPS target portion of the award was determined based on the closing stock price of the Company’s common stock on the grant date. The fair value of the TSR target portion of the award was determined using a Monte Carlo Simulation at the grant date.

In establishing PSU components during 2021 and 2020, the Compensation Committee determined the EPS target portion of the award would not be an effective metric in light of economic uncertainty surrounding COVID-19. Consequently, the Compensation Committee granted an award based upon a relative return on tangible assets (“ROTA”). Annually, the Company’s ROTA is compared to the respective ROTA of companies comprising the KBW Regional Index. At the end of the measurement period, the Company’s ranking will be averaged to determine the shares awarded. The fair value of the ROTA award was determined based on the closing stock price of the Company’s common stock on the grant date.

The weighted-average grant date fair value per unit for the awards granted during the nine months ended September 30, 2023 of the EPS target portion and the TSR target portion was $33.46 and $27.06, respectively. The initial weighted-average performance price

for the TSR target portion granted during 2023 was $42.37. During the nine months ended September 30, 2023, the Company awarded an additional 18,664 units due to final performance results related to performance stock units granted in 2020.

The following table summarizes restricted stock and performance stock unit activity during the nine months ended September 30, 2023:


				Weighted						Weighted
		Restricted		average grant-			Performance			average grant-
		stock shares		date fair value			stock units			date fair value
Unvested at December 31, 2022		165,137		$	38.28		155,857		$	33.81
Granted		184,227			31.15		79,215			30.57
Adjustment due to performance		—			—		18,664			25.94
Vested		(79,014)			35.08		(74,142)			26.55
Forfeited		(7,275)			35.63		(6,995)			35.05
Unvested at September 30, 2023		263,075		$	34.32		172,599		$	34.54

As of September 30, 2023, the total unrecognized compensation cost related to the non-vested restricted stock awards and performance stock units totaled $5.6 million and $3.4 million, respectively, and is expected to be recognized over a weighted average period of approximately 2.2 years and 1.9 years, respectively. Expense related to non-vested restricted stock awards totaled $1.2 million and $3.2 million during the three and nine months ended September 30, 2023, respectively, and $0.9 million and $2.5 million during the three and nine months ended September 30, 2022, respectively. Expense related to non-vested performance stock units totaled $0.4 million and $1.3 million during the three and nine months ended September 30, 2023, respectively, and $0.4 million and $1.2 million during the three and nine months ended September 30, 2022, respectively. Expense related to non-vested restricted stock awards and units is a component of salaries and benefits in the Company’s consolidated statements of operations.

Employee stock purchase plan

The 2014 Employee Stock Purchase Plan (“ESPP”) is intended to be a qualified plan within the meaning of Section 423 of the Internal Revenue Code of 1986 and allows eligible employees to purchase shares of common stock up to a limit of $25,000 per calendar year and 2,000 shares per offering period. The price an employee pays for shares is 90.0% of the fair market value of Company common stock on the last day of the offering period. The offering periods are the six-month periods commencing on March 1 and September 1 of each year and ending on August 31 and February 28 (or February 29 in the case of a leap year) of each year. There are no vesting or other restrictions on the stock purchased by employees under the ESPP. Under the ESPP, the total number of shares of common stock reserved for issuance totaled 400,000 shares, of which 235,919 was available for issuance at September 30, 2023.

Under the ESPP, employees purchased 26,563 shares and 19,414 shares during the nine months ended September 30, 2023 and 2022, respectively.