Stock Based Compensation

3 Months Ended

Mar. 31, 2021

Share-based Payment Arrangement [Abstract]

Equity Plans

2017 Omnibus Incentive Plan

The Company adopted the Tiptree 2017 Omnibus Incentive Plan (2017 Equity Plan) on June 6, 2017, which permits the grant of restricted stock units (RSUs), stock, and stock options up to a maximum of 6,100,000 shares of common stock. The general purpose of the 2017 Equity Plan is to attract, motivate and retain selected employees and directors for the Company and its subsidiaries, to provide them with incentives and rewards for performance and to better align their interests with the interests of the Company’s stockholders. Unless otherwise extended, the 2017 Equity Plan terminates automatically on June 6, 2027. The table below summarizes changes to the issuances under the Company’s 2017 Equity Plan for the periods indicated, excluding awards granted under the Company’s subsidiary incentive plans that are exchangeable for Tiptree common stock:


2017 Equity Plan			Number of shares (1)











Available for issuance as of December 31, 2020			3,788,417
RSU, stock and option awards granted			(25,381)
Available for issuance as of March 31, 2021			3,763,036

(1) Excludes awards granted under the Company’s subsidiary incentive plans that are exchangeable for Tiptree common stock.

Restricted Stock Units and Stock Awards

Tiptree Corporate Incentive Plans

The Company values RSUs at their grant-date fair value as measured by Tiptree’s common stock price. Generally, the Tiptree RSUs vest and become non-forfeitable with respect to one-third of Tiptree shares granted on each of the first, second and third year anniversaries of the date of the grant, and expensed using the straight-line method over the requisite service period.

Stock Awards - Directors’ Compensation

The Company values the stock awards at their issuance-date fair value as measured by Tiptree’s common stock price. Upon issuance, the awards are deemed to be granted and immediately vested.

The following table presents changes to the issuances of RSUs and stock awards under the 2017 Equity Plan for the periods indicated:


	Number of shares issuable	Weighted average grant date fair value












Unvested units as of December 31, 2020	953,145	$	6.52
Granted	25,381	5.03
Vested	(379,514)	6.32

Unvested units as of March 31, 2021	599,012	$	6.59

The following tables present the detail of the granted and vested RSUs and stock awards for the periods indicated:


	Three Months Ended March 31,		Three Months Ended March 31,
Granted	2021	2020		Vested	2021	2020
Directors	25,381	9,232		Directors	25,381	9,232
Employees (1)	—	469,257		Employees	354,133	364,984
Total Granted	25,381	478,489		Total Vested	379,514	374,216
				Taxes	(34,828)	(51,507)

				Net Vested	344,686	322,709

(1) Includes 256,619 shares that vest ratably over three years and 212,638 shares that cliff vest in February 2021 for the three months ended March 31, 2020.

Subsidiary Incentive Plans

Certain of the Company’s subsidiaries have established incentive plans under which they are authorized to issue equity of those subsidiaries to certain of their employees. Such awards are accounted for as equity. These awards are subject to performance-vesting criteria based on the performance of the subsidiary (performance vesting awards) and time-vesting subject to continued employment (time vesting awards). Following the service period, such vested awards may be exchanged at fair market value, at the option of the holder, for Tiptree common stock under the 2017 Equity Plan. The service period for certain grants has been achieved and those vested subsidiary awards are currently eligible for exchange. The Company has the option, but not the obligation to settle the exchange right in cash.

The following table presents changes to the issuances of subsidiary awards under the subsidiary incentive plans for the periods indicated:


	Grant date fair value of equity shares issuable












Unvested balance as of December 31, 2020	$	4,305
Granted	1,079
Vested	(1,358)
Unvested balance as of March 31, 2021	$	4,026

The net vested balance of subsidiary awards eligible for exchange as of March 31, 2021 translates to 2,570,055 shares of Tiptree common stock.

Stock Option Awards

Tiptree Corporate Incentive Plans

Option awards have been granted to the Executive Committee with an exercise price equal to the fair market value of our common stock on the date of grant. The option awards have a 10-year term and are subject to the recipient’s continuous service, a market requirement, and vest one third on each of the three, four, and five year anniversaries of the grant date. The market requirement is the Company's 20-day volume weighted average per share trading price plus actual cash dividends paid following issuance of the option that exceeds the book value on the option grant date. If the service condition is met, the full amount of the compensation expense will be recognized over the appropriate vesting period whether the market requirement is met or not. The options granted after 2017 include a retirement provision and are amortized over the lesser of the service condition or expected retirement date. Book value targets for grants in 2020, 2019, 2018, 2017 and 2016 are $11.52, $10.79, $9.97, $10.14 and $8.96, respectively. There were no options granted for the three months ended March 31, 2021.

The fair value option grants are estimated on the date of grant using a Black-Scholes-Merton option pricing formula embedded within a Monte Carlo model used to simulate the future stock prices of the Company, which assumes that the market requirement is achieved. Historical volatility was computed based on historical daily returns of the Company’s stock between the grant date and July 1, 2013, the date of the business combination through which Tiptree became a public company. The valuation is done under a risk-neutral framework using the 10-year zero-coupon risk-free interest rate derived

from the Treasury Constant Maturities yield curve on the grant date. The current quarterly dividend rates in effect as of the date of the grant are used to calculate a spot dividend yield as of the date of grant for use in the model.

The following table presents the assumptions used to estimate the fair values of the stock options granted for the following periods:

Valuation Input (1)

Three Months Ended March 31, 2020

Assumption

Average

Historical volatility

27.60%

N/A

Risk-free rate

1.51%

N/A

Dividend yield

2.20%

N/A

Expected term (years)

7.0

(1) Not applicable for the three months ended March 31, 2021 as there were no new grants during the period.

The following table presents the Company's stock option activity for the current period:


	Options outstanding	Weighted average exercise price (in dollars per stock option)		Weighted average grant date value (in dollars per stock option)		Options exercisable






Balance, December 31, 2020	1,715,619	$	6.49	$	2.29	—

Balance, March 31, 2021	1,715,619	$	6.49	$	2.29	—

Weighted average remaining contractual term at March 31, 2021 (in years)	6.9

Stock Based Compensation Expense

The following table presents total stock based compensation expense and the related income tax benefit recognized on the condensed consolidated statements of operations:


	Three Months Ended March 31,
	2021		2020
Employee compensation and benefits	$	955	$	1,543
Director compensation	110		73
Income tax benefit	(224)		(349)
Net stock based compensation expense	$	841	$	1,267

Additional information on total non-vested stock based compensation is as follows:


	As of
	March 31, 2021
	Stock options		Restricted stock awards and RSUs
Unrecognized compensation cost related to non-vested awards	$	434	$	4,721
Weighted - average recognition period (in years)	2.07		1.73