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Stock Based Compensation

6 Months Ended

Jun. 30, 2023

Share-Based Payment Arrangement [Abstract]

STOCK BASED COMPENSATION

Stock based compensation expense that has been charged against income was $3,320,000 and $7,880,000 for the three months ended June 30, 2023 and 2022, respectively, and $6,201,000 and $12,832,000 for the six months ended June 30, 2023 and 2022, respectively.

2014 Omnibus Incentive Plan

The Company’s 2014 Omnibus Incentive Plan (“Omnibus Incentive Plan”) provides for the grant of nonqualified and incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units, and other awards that may be settled in, or based upon the value of, the Company’s common stock. The maximum number of shares of common stock available for issuance under the Omnibus Incentive Plan is 2,900,000 shares.

Restricted Stock Awards

A summary of changes in the Company’s nonvested Restricted Stock Awards (“RSAs”) under the Omnibus Incentive Plan for the six months ended June 30, 2023 were as follows:


Nonvested RSAs	Shares	Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2023	230,486	70.34
Granted	6,852	58.25
Vested	(101,101)	60.28
Forfeited	(11,412)	76.06
Nonvested at June 30, 2023	124,825	77.00

RSAs granted to employees under the Omnibus Incentive Plan typically vest immediately or over four years. Compensation expense for the RSAs will be recognized over the vesting period of the awards based on the fair value of the stock at the issue date. As of June 30, 2023, there was $3,177,000 of unrecognized compensation cost related to the nonvested RSAs. The cost is expected to be recognized over a remaining period of 1.80 years.

Restricted Stock Units

A summary of changes in the Company’s nonvested Restricted Stock Units (“RSUs”) under the Omnibus Incentive Plan for the six months ended June 30, 2023 were as follows:


Nonvested RSUs	Shares	Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2023	211,300	59.45
Granted	121,050	51.25
Vested	(114,509)	43.19
Forfeited	(2,551)	67.58
Nonvested at June 30, 2023	215,290	63.39

RSUs granted to employees under the Omnibus Incentive Plan typically vest over four to five years. Compensation expense for the RSUs will be recognized over the vesting period of the awards based on the fair value of the stock at the issue date. As of June 30, 2023, there was $9,930,000 of unrecognized compensation cost related to the nonvested RSUs. The cost is expected to be recognized over a remaining period of 3.18 years.

Market Based Performance Stock Units

A summary of changes in the Company’s nonvested Market Based Performance Stock Units (“Market Based PSUs”) under the Omnibus Incentive Plan for the six months ended June 30, 2023 were as follows:


Nonvested Market Based PSUs	Shares	Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2023	112,486	$	55.57
Granted	78,872	78.15
Incremental shares earned	52,694	N/A
Vested	(122,969)	36.10
Forfeited	(155)	38.57
Nonvested at June 30, 2023	120,928	$	81.63

Market Based PSUs granted to employees under the Omnibus Incentive Plan vest after three to five years. The number of shares issued upon vesting will range from 0% to 175% of the Market Based PSUs granted based on the Company’s relative total shareholder return (“TSR”) as compared to the TSR of specified groups of peer banks and financial technology companies, and with respect to the Company's 2023 awards may include an additional multiplier of up to 200% of the otherwise earned award based on the Company's absolute TSR. Compensation expense for the Market Based PSUs will be recognized over the vesting period of the awards based on the fair value of the award at the grant date. The fair value of Market Based PSUs granted is estimated using a Monte Carlo simulation. Expected volatilities were determined based on the historical volatilities of the Company and the specified peer group. The risk-free interest rate for the performance period was derived from the Treasury constant maturities yield curve on the valuation dates.

The fair value of the Market Based PSUs granted was determined using the following weighted-average assumptions:


	Six Months Ended June 30,
	2023			2022
Grant date	May 1, 2023			May 1, 2022
Performance period	3.00 years			3.00 years
Stock price	$	51.25		$	69.44
Triumph Financial stock price volatility	49.33		%	55.17		%
Risk-free rate	3.76		%	2.84		%

As of June 30, 2023, there was $7,691,000 of unrecognized compensation cost related to the nonvested Market Based PSUs. The cost is expected to be recognized over a remaining period of 2.55 years.

Performance Based Performance Stock Units

A summary of changes in the Company’s nonvested Performance Based Performance Stock Units (“Performance Based PSUs”) under the Omnibus Incentive Plan for the six months ended June 30, 2023 were as follows:


Nonvested Performance Based PSUs	Shares	Weighted Average Grant Date Fair Value
Nonvested at January 1, 2023	255,738	$	39.57
Granted	—	—
Incremental shares earned	107,404	N/A
Vested	(363,142)	40
Forfeited	—	—
Nonvested at June 30, 2023	—	$	—

The Performance Based PSUs granted to employees under the Omnibus Incentive Plan vested after a three year performance period. Under the terms of the award agreements, the number of shares issued upon vesting could range from 0% to 200% of the shares granted based on the Company’s cumulative diluted earnings per share over the performance period. The performance period for the outstanding Performance Based PSUs ended on December 31, 2022, and the awards subsequently vested at 142% of the target shares granted.

Compensation expense for the Performance Based PSUs was estimated during the performance period based on the fair value of the stock at the grant date and the most probable outcome of the performance condition at each period end, adjusted for the passage of time within the vesting period of the awards. There was no stock based compensation cost related to Performance Based PSUs during the three and six months ended June 30, 2023 and there is no remaining unrecognized compensation cost related to these awards. During the three and six months ended June 30, 2022, the Company recognized $4,328,000 and $5,135,000, respectively, of stock based compensation cost related to Performance Based PSUs.

Stock Options

A summary of the changes in the Company’s stock options under the Omnibus Incentive Plan for the six months ended June 30, 2023 were as follows:


Stock Options	Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value (In Thousands)
Outstanding at January 1, 2023	195,398	$	39.48
Granted	57,930	51.25
Exercised	(6,023)	31.61
Forfeited or expired	—	—
Outstanding at June 30, 2023	247,305	$	42.43	6.59	$	5,280

Fully vested shares and shares expected to vest at June 30, 2023	247,305	$	42.43	6.59	$	5,280

Shares exercisable at June 30, 2023	148,332	$	32.81	4.86	$	4,447

Information related to the stock options for the six months ended June 30, 2023 and 2022 was as follows:


	Six Months Ended June 30,
(Dollars in thousands, except per share amounts)	2023		2022
Aggregate intrinsic value of options exercised	$	140	$	280
Cash received from option exercises, net	(52)		(74)
Tax benefit realized from option exercises	29		59
Weighted average fair value per share of options granted	$	25.20	$	32.15

Stock options awarded to employees under the Omnibus Incentive Plan are generally granted with an exercise price equal to the market price of the Company’s common stock at the date of grant, vest over four years, and have ten year contractual terms. The fair value of stock options granted is estimated at the date of grant using the Black-Scholes option-pricing model. Expected volatilities are determined based on the Company’s historical volatility. The expected term of the options granted is determined based on the SEC simplified method, which calculates the expected term as the mid-point between the weighted average time to vesting and the contractual term. The risk-free interest rate for the expected term of the options is derived from the Treasury constant maturity yield curve on the valuation date.

The fair value of the stock options granted was determined using the following weighted-average assumptions:


	Six Months Ended June 30,
	2023		2022
Risk-free interest rate	3.38	%	2.77	%
Expected term	6.25 years		6.25 years
Expected stock price volatility	45.65	%	43.33	%
Dividend yield	—		—

As of June 30, 2023, there was $1,828,000 of unrecognized compensation cost related to nonvested stock options granted under the Omnibus Incentive Plan. The cost is expected to be recognized over a remaining period of 3.30 years.

Employee Stock Purchase Plan

During the year ended December 31, 2019, the Company’s Board of Directors adopted, and the Company’s stockholders approved, the Company's 2019 Employee Stock Purchase Plan (“ESPP”). Under the ESPP, 2,500,000 shares of common stock were reserved for issuance. The ESPP enables eligible employees to purchase the Company’s common stock at a price per share equal to 85% of the lower of the fair market value of the common stock at the beginning or end of each six month offering period. During the six months ended June 30, 2023 and 2022, 21,057 shares and 10,585 shares, respectively, were issued under the plan.