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STOCK-BASED COMPENSATION

3 Months Ended

Mar. 31, 2024

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

NOTE 19. STOCK-BASED COMPENSATION

SUMMARY OF STOCK-BASED COMPENSATION

A summary of share activity for all equity classified stock compensation during the three months ended March 31, 2024 is presented below.


Type of Award		Shares Outstanding at 1/1/2024			Granted Shares			Vested / Exercised Shares			Expired Shares			Forfeited Shares			Shares Outstanding at 3/31/2024
Equity Classified - Performance Share Awards - Peer Group Market Condition Vesting			237,375			100,391			(85,938)			—			—			251,828
Equity Classified - Three Year Vest Restricted Shares			216,357			107,191			(75,434)			—			(2,876)			245,238
Total Shares			453,732			207,582			(161,372)			—			(2,876)			497,066

Amounts recognized in the financial statements for stock-based compensation are as follows (in thousands):


		Three Months Ended
		March 31, 2024			March 31, 2023
Total Cost of Share-Based Plans Charged Against Income		$	1,387		$	1,072

EQUITY-CLASSIFIED STOCK COMPENSATION

Performance Share Awards – Peer Group Market Condition Vesting

Performance shares have been granted to certain employees under the 2010 Plan. The performance share awards entitle the recipient to receive, upon the vesting thereof, shares of common stock of the Company equal to between 0% and 150% of the number of performance shares awarded. The number of shares of common stock ultimately received by the award recipient is determined based on the Company’s total stockholder return as compared to the total stockholder return of a certain peer group during a three-year performance period. The Company granted a total of 100,391 performance shares during the three months ended March 31, 2024.

The Company used a Monte Carlo simulation pricing model to determine the fair value of its awards that are based on market conditions. The determination of the fair value of market condition-based awards is affected by the Company’s stock price as well as assumptions regarding a number of other variables. These variables include expected stock price volatility over the requisite performance term of the awards, the relative performance of the Company’s stock price and stockholder returns to companies in its peer group, annual dividends, and a risk-free interest rate assumption. Compensation cost is recognized regardless of the achievement of the market conditions, provided the requisite service period is met.

As of March 31, 2024, there was $2.6 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to the non-vested performance share awards, which will be recognized over a remaining weighted average period of 2.2 years.

A summary of the activity for these awards during the three months ended March 31, 2024 is presented below:


Performance Shares With Market Conditions		Shares			Wtd. Avg. Fair Value Per Share
Non-Vested at January 1, 2024			237,375		$	18.08
Granted			100,391		$	15.28
Vested			(85,938)		$	15.99
Expired			—		$	—
Forfeited			—		$	—
Non-Vested at March 31, 2024			251,828		$	17.68

Restricted Shares

Restricted shares have been granted to certain employees under the 2010 Plan. Certain of the restricted shares vest on each of the first, second, and third anniversaries of January 28 of the applicable year provided the grantee is an employee of the Company on those dates. Certain other restricted share awards, granted on July 1, 2022, vest entirely on the third anniversary of the grant date, or July 1, 2025, provided the grantee is an employee of the Company on that date. In addition, any unvested portion of the restricted shares will vest upon a change in control. The Company granted a total of 107,191 shares of restricted Company common stock during the three months ended March 31, 2024.

The Company’s determination of the fair value of the restricted stock awards was calculated by multiplying the number of shares issued by the Company’s stock price at the grant date. Compensation cost is recognized on a straight-line basis over the applicable vesting period.

As of March 31, 2024, there was $2.9 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to the non-vested restricted share awards, which will be recognized over a remaining weighted average period of 2.1 years.

A summary of the activity for these awards during the three months ended March 31, 2024 is presented below:


Non-Vested Restricted Shares		Shares			Wtd. Avg. Fair Value Per Share
Non-Vested at January 1, 2024			216,357		$	19.07
Granted			107,191		$	16.31
Vested			(75,434)		$	17.80
Expired			—		$	—
Forfeited			(2,876)		$	16.97
Non-Vested at March 31, 2024			245,238		$	18.25

NON-EMPLOYEE DIRECTOR STOCK COMPENSATION

Each member of the Company’s Board of Directors has the option to receive his or her annual retainer and meeting fees in shares of Company common stock rather than cash. The number of shares awarded to the directors making such election is calculated quarterly by dividing (i) the sum of (A) the amount of the quarterly retainer payment due to such director plus (B) meeting fees earned by such director during the quarter, by (ii) the trailing 20-day average price of the Company’s common stock as of the last day of the quarter, rounded down to the nearest whole number of shares.

Each non-employee director serving as of the beginning of each calendar year shall receive an annual award of the Company’s common stock. The value of such award totaled $62,500 and $35,000 for the three months ended March 31, 2024 and 2023, respectively, (the “Annual Award”). The number of shares awarded is calculated based on the trailing 20-day average price of the Company’s common stock as of the date two business days prior to the date of the award, rounded down to the nearest whole number of shares. Non-employee directors do not receive meeting fees, but do receive additional retainers for service on Board committees, as set forth in the Company’s Non-Employee Director Compensation Policy available on the Company’s website (www.ctoreit.com).

During the three months ended March 31, 2024 and 2023, the expense recognized for the value of the Company’s common stock received by non-employee directors totaled $0.4 million, or 23,961 shares, and $0.2 million, or 12,764 shares, respectively. The expense recognized includes the Annual Award received during the first quarter of each respective year, which totaled $0.3 million and $0.2 million during each of the three months ended March 31, 2024 and 2023, respectively.