Stock-Based Compensation

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

On July 24, 2014, the Company's shareholders approved the Equity Plan that provides for the issuance of 1,500,000 shares of the Company's common stock in the form of various types of stock-based compensation. As of December 31, 2022, shares remaining available for future issuance under the Equity Plan totaled 330,398.

(a) Stock Option Awards

All outstanding stock options were exercised during the year ended December 31, 2020. The intrinsic value from options exercised during the year ended December 31, 2020 was $61,000. The cash proceeds from options exercised during the year ended December 31, 2020 was $122,000.

The following table summarizes the stock option activity during the year ended December 31, 2020:


	Shares	Weighted-Average Exercise Price
Outstanding at December 31, 2019	8,657	$	14.77
Exercised	(8,248)	14.77


Forfeited or expired	(409)	14.77
Outstanding at December 31, 2020	—	—

(b) Restricted Stock Awards

Restricted stock awards generally had a four-year cliff vesting or four-year ratable vesting schedule. The remaining restricted stock awards vested during the year ended December 31, 2020. For the year ended December 31, 2020, the Company recognized compensation expense related to restricted stock awards of $76,000, and a related tax benefit of $17,000. The vesting date fair value of restricted stock awards that vested during the year ended December 31, 2020 was $442,000.

The following table summarizes the restricted stock award activity for the year ended December 31, 2020:


	Shares	Weighted-Average Grant Date Fair Value
Nonvested at December 31, 2019	20,707	$	17.59
Vested	(20,707)	17.59
Nonvested at December 31, 2020	—	—

Restricted stock units generally vest ratably over three years and are subject to service conditions in accordance with each award agreement.

Performance-based restricted stock units have a three-year cliff vesting schedule, participate in dividends and are additionally subject to performance-based vesting. The conditions of the grants allow for an actual payout ranging between no payout and 150% of target. The payout level is calculated based on the percentile level of the market condition, which includes the ratio of the Company's total shareholder return and the ratio of the Company's return on average assets and return on tangible common equity over the performance period in relation to the performance of these metrics of a predetermined peer group. The fair value of each performance-based restricted stock unit, inclusive of the market condition, was determined using a Monte Carlo simulation and will be recognized over the vesting period. The Monte-Carlo simulation model uses the same input assumptions as the Black-Scholes model; however, it also further incorporates into the fair value determination the possibility the market condition may not be satisfied. Compensation costs related to these awards are recognized regardless of whether the market condition is satisfied, provided the requisite service has been provided.

The Company used the following assumptions to estimate the fair value of performance-based restricted share units granted for the periods indicated:


	Year Ended December 31,
	2022		2021		2020
Shares issued	15,464		14,347		15,200
Expected Term in Years	2.9		2.9		2.8
Weighted-Average Risk Free Interest Rate	1.7	%	0.3	%	1.1	%
Weighted Average Fair Value	25.87		24.49		23.5
Correlation coefficient	ABA NASDAQ Community Bank Index		ABA NASDAQ Community Bank Index		ABA NASDAQ Community Bank Index
Range of peer company volatilities	31.6%-77.8%		31.4%-136.4%		18.1%-107.6%
Range of peer company correlation coefficients	49.7%-94.4%		34.1%-94.8%		16.1%-90.2%
Company volatility	41.3	%	40.2	%	23.2	%
Company correlation coefficient	90.4	%	90.1	%	80.5	%

Expected volatilities in the model were estimated using a historical period consistent with the performance period of approximately three years. The risk-free interest rate was based on the United States Treasury rate for a term commensurate with the expected life of the grant.

For the years ended December 31, 2022, 2021 and 2020, the Company recognized compensation expense related to restricted stock units of $3.8 million, $3.7 million, and $3.5 million respectively, and a related tax benefit of $833,000, $802,000, and $757,000, respectively. As of December 31, 2022, the total unrecognized compensation expense related to non-vested restricted stock units was $6.1 million and the related weighted-average period over which the compensation expense is expected to be recognized is approximately 2.2 years. The vesting date fair value of the restricted stock units that vested during the years ended December 31, 2022, 2021 and 2020 was $3.3 million, $3.6 million and $2.4 million, respectively.

The following table summarizes the unit activity for the periods indicated:


	Units	Weighted-Average Grant Date Fair Value
Nonvested at December 31, 2019	233,540	$	30.41
Granted	200,972	23.61
Vested	(109,853)	29.21
Forfeited	(8,543)	28.07
Nonvested at December 31, 2020	316,116	26.57
Granted	147,944	25.70
Vested	(125,377)	26.84
Forfeited	(23,669)	27.20
Nonvested at December 31, 2021	315,014	26.01
Granted	230,402	25.72
Vested	(127,952)	26.99
Forfeited	(38,572)	26.73
Nonvested at December 31, 2022	378,892	$	25.42