Earnings Per Common Share And Share Awards

6 Months Ended

Jun. 30, 2022

Earnings Per Common Share And Share Awards

Earnings Per Common Share and Share Awards

Basic earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per common share is computed by dividing net income by the combination of dilutive potential common stock, comprised of shares issuable under the Company’s share-based compensation plans, and the weighted average number of common shares outstanding during the reporting period. Dilutive common share equivalents include the dilutive effect of in-the-money share-based awards, which are calculated based on the average share price for each period using the treasury stock method. Under the treasury stock method, when share-based awards are assumed to be exercised, (a) the exercise price of a share-based award and (b) the amount of compensation cost, if any, for future services that the Company has not yet recognized, are assumed to be used to repurchase shares in the current period.

The following table sets forth the computation of basic and diluted earnings per share for the three- and six-month periods ended June 30:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share amounts)	2022		2021		2022		2021
Net income	$	2,279	$	19,782	$	8,464	$	33,605
Weighted average common shares outstanding – Basic	1,897		1,894		1,897		1,894
Incremental shares outstanding assuming the exercise of dilutive SARs (share-settled)	2		5		3		4
Weighted average common shares outstanding – Diluted	1,899		1,899		1,900		1,898
Basic earnings per common share	$	1.20	$	10.44	$	4.46	$	17.74
Diluted earnings per common share	$	1.20	$	10.42	$	4.45	$	17.70

There were 13 thousand and 14 thousand potential shares excluded from the computation of diluted earnings per share for the three-month periods ended June 30, 2022 and 2021, respectively, due to the out-of-the-money status of the related share-based awards. There were 13 thousand and 14 thousand potential shares excluded from the computation of diluted earnings per share for the six-month periods ended June 30, 2022 and 2021, respectively, due to the out-of-the-money status of the related share-based awards.

The Company historically has adopted employee stock award plans under which restricted stock, options or stock appreciation rights ("SARs") exercisable for the Company's stock may be granted to key employees or directors of the Company. There is currently one active plan from which the Company may grant share-based awards. The awards eligible to be granted under the active plan are limited to SARs, and the maximum aggregate number of shares of common stock of the Company available pursuant to the plan for the grant of SARs is 250 thousand shares. SARs give the holder the right to receive stock equal to the appreciation in the value of shares of stock from the grant date for a specified period of time, and as a result, are accounted for as equity instruments.

As of June 30, 2022, the only outstanding awards under the plans were SARs, which expire within seven years or less from the date of grant. All outstanding SARs vest and are exercisable within five years or less from the date of grant, and all SARs issued to date have been share-settled only. There have been no stock options or SARs granted where the exercise price was less than the market price on the date of grant.

A summary of share-based award transactions for all share-based award plans follows:


(in thousands, except weighted average exercise price and average remaining contractual term)	Number Of Shares	Weighted Average Exercise Price		Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding as of January 1, 2021	36	$	139.16	4.38	$	903
SARs granted	5	184.26
SARs exercised	(6)	106.71
Outstanding as of December 31, 2021	35	$	150.36	3.96	$	1,643
SARs granted	5	166.90
SARs exercised	(4)	89.23
Outstanding as of June 30, 2022	36	$	159.32	4.16	$	407

Exercisable as of June 30, 2022	27	$	161.95	3.65	$	324

Unvested as of June 30, 2022	9	$	151.27	5.73	$	83

During the second quarters of both 2022 and 2021, the Company issued 5 thousand share-settled SARs to directors of the Company. The fair value of each award is estimated on the date of grant using the Black-Scholes option valuation model with the weighted average assumptions noted in the table shown below. Expected volatilities are based on both the implied and historical volatility of the Company’s stock. The Company uses historical data to project SAR exercises and pre-exercise forfeitures within the valuation model. The expected term of awards represents the period of time that SARs granted are expected to be outstanding. The interest rate assumed for the expected life of the award is based on the U.S. Treasury yield curve in effect at the time of the grant. The weighted average fair value for the SARs issued during 2022 and 2021 were $69.64 and $59.83, respectively, and were estimated using the weighted average assumptions shown in the table below:


	2022	2021
Expected Life in Years	7.0	7.0
Volatility	35.0%	33.9%
Interest Rate	2.9%	1.3%
Yield Rate	0.1%	1.1%

There was approximately $180 thousand and $139 thousand of compensation expense relating to SARs vesting on or before June 30, 2022 and 2021, respectively, included in personnel expenses in the unaudited Consolidated Statements of Operations. As of June 30, 2022, there was $441 thousand of unrecognized compensation expense related to unvested share-based compensation arrangements granted under the Company’s stock award plans.