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Stock Options and Restricted Stock

3 Months Ended

Mar. 31, 2024

Stock Options and Restricted Stock

Stock Options and Restricted Stock

Note 11: Stock Options and Restricted Stock

In 2012, the Company adopted the Bridgewater Bancshares, Inc. 2012 Combined Incentive and Non-Statutory Stock Option Plan (the “2012 Plan”) under which the Company was able to grant options to its directors, officers, and employees for up to 750,000 shares of common stock. Both incentive stock options and nonqualified stock options were granted under the 2012 Plan. The exercise price of each option equals the fair market value of the Company’s stock on the date of grant, and the maximum term of each outstanding option is ten years. All outstanding options have been granted with vesting periods of four or five years. The 2012 Plan expired in March 2022, and awards are no longer able to be granted under the 2012 Plan.

In 2017, the Company adopted the Bridgewater Bancshares, Inc. 2017 Combined Incentive and Non-Statutory Stock Option Plan (the “2017 Plan”). Under the 2017 Plan, the Company may grant options to its directors, officers, employees and consultants for up to 1,500,000 shares of common stock. Both incentive stock options and nonqualified stock options may be granted under the 2017 Plan. The exercise price of each option equals the fair market value of the Company’s stock on the date of grant and the maximum term of each outstanding option is ten years. All outstanding options have been granted with vesting periods of four or five years. As of both March 31, 2024 and December 31, 2023, there were 5,000 shares of the Company’s common stock reserved for future option grants under the 2017 Plan.

In 2019, the Company adopted the Bridgewater Bancshares, Inc. 2019 Equity Incentive Plan (the “2019 EIP”). The types of awards which may be granted under the 2019 EIP include incentive and nonqualified stock options, stock appreciation rights, stock awards, restricted stock units, restricted stock and cash incentive awards. The Company may grant these awards to its directors, officers, employees and certain other service providers for up to 1,000,000 shares of common stock. The exercise price of each option equals the fair market value of the Company’s stock on the date of grant and the maximum term of each award is ten years. All outstanding awards have been granted with a vesting period of four years. As of March 31, 2024 and December 31, 2023, there were 6,592 and -0- shares, respectively, of the Company’s common stock reserved for future grants under the 2019 EIP.

In 2023, the Company adopted the Bridgewater Bancshares, inc. 2023 Equity Incentive Plan (the "2023 EIP"). Under the 2023 EIP, the Company may grant incentive and nonqualified stock options, stock appreciation rights, stock awards, restricted stock units, restricted stock and cash incentive awards. The Company may grant these awards to its directors, officers, employees and certain other service providers for up to 1,500,000 shares of common stock. The exercise price of each option equals the fair market value of the Company’s stock on the date of grant and the maximum term of each award is ten years. All outstanding awards have been granted with a vesting period of four years. As of

March 31, 2024 and December 31, 2023, there were 1,042,800 and 1,107,752 shares, respectively, of the Company’s common stock reserved for future grants under the 2023 EIP.

Stock Options

The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model. The following table presents a summary of the status of the Company’s outstanding stock options for the three months ended March 31, 2024:


		March 31, 2024
				Weighted
				Average
		Shares		Exercise Price
Outstanding at Beginning of Year		2,014,994		$	10.57
Granted		—			—
Exercised		(8,000)			8.28
Forfeitures		(5,000)			11.10
Outstanding at Period End		2,001,994		$	10.58

Options Exercisable at Period End		1,421,494		$	9.80

For the three months ended March 31, 2024 and 2023, the Company recognized compensation expense for stock options of $249,000 and $186,000, respectively.

The following table presents information pertaining to options outstanding at March 31, 2024:


			Options Outstanding							Options Exercisable
								Weighted Average
			Number of		Weighted Average			Remaining Contractual		Number of		Weighted Average
Range of Exercise Prices			Options		Exercise Price			Life in Years		Options		Exercise Price
$	3.00 - 3.99		10,000		$	3.58		0.8		10,000		$	3.58
	7.00 - 7.99		888,966			7.47		3.5		888,966			7.47
	8.00 - 8.99		12,500			8.76		6.0		6,250			8.76
	10.00 - 10.99		249,000			10.63		9.2		7,500			10.08
	11.00 - 11.99		262,500			11.15		8.2		75,000			11.29
	12.00 - 12.99		263,528			12.90		5.3		263,528			12.90
	13.00 - 13.99		25,000			13.22		4.1		25,000			13.22
	17.00 - 17.99		290,500			17.50		7.8		145,250			17.50
	Totals		2,001,994		$	10.58		5.7		1,421,494		$	9.80

As of March 31, 2024, there was $2.5 million of total unrecognized compensation cost related to nonvested stock options that is expected to be recognized over a weighted-average period of 3.0 years.

The following table presents an analysis of nonvested options to purchase shares of the Company’s stock issued and outstanding for the three months ended March 31, 2024:


				Weighted
		Number of		Average Grant
		Shares		Date Fair Value
Nonvested Options at December 31, 2023		666,250		$	5.09
Granted		—			—
Vested		(80,750)			5.05
Forfeited		(5,000)			4.58
Nonvested Options at March 31, 2024		580,500		$	5.10

Restricted Stock Awards

In 2019 and 2020, the Company granted restricted stock awards out of the 2019 EIP. These awards vest in equal annual installments on the first four anniversaries of the date of the grant. Nonvested restricted stock awards are classified as outstanding shares with forfeitable voting and dividend rights.

The following table presents an analysis of nonvested restricted stock awards outstanding for the three months ended March 31, 2024:


				Weighted
		Number of		Average Grant
		Shares		Date Fair Value
Nonvested at December 31, 2023		3,411		$	10.53
Granted		—			—
Vested		(987)			12.67
Forfeited		—			—
Nonvested at March 31, 2024		2,424		$	9.66

Compensation expense associated with the restricted stock awards is recognized on a straight-line basis over the period that the restrictions associated with the awards lapse based on the total cost of the award at the grant date. For the three months ended March 31, 2024 and 2023, the Company recognized compensation expense for restricted stock awards of $8,000 and $111,000, respectively.

As of March 31, 2024, there was $5,000 of total unrecognized compensation cost related to nonvested restricted stock awards granted under the 2019 EIP that is expected to be recognized over a weighted-average period of 0.4 years.

In addition, during the three months ended March 31, 2024, the Company issued 10,452 shares of unrestricted common stock to non-employee directors, as a part of their compensation for their annual services on the Company’s board of directors. The aggregate value of the shares issued to non-employee directors of $121,000 was included in stock based compensation expense in the accompanying consolidated statements of shareholders’ equity.

Restricted Stock Units

The Company has granted restricted stock units out of the 2019 EIP and 2023 EIP. Restricted stock units represent the right to receive one share of Company stock upon vesting and vest in equal annual installments on the first four anniversaries of the date of the grant. Nonvested restricted stock units have no voting or dividend rights and are not considered outstanding until vesting.

The following table presents an analysis of nonvested restricted stock units outstanding for the three months ended March 31, 2024:


				Weighted
		Number of		Average Grant
		Units		Date Fair Value
Nonvested at December 31, 2023		441,015		$	14.71
Granted		63,184			11.89
Vested		(22,365)			15.60
Forfeited		(10,276)			14.75
Nonvested at March 31, 2024		471,558		$	14.29

Compensation expense associated with the restricted stock units is recognized on a straight-line basis over the period that the restrictions associated with the units lapse based on the total cost of the unit at the grant date. For the three months ended March 31, 2024 and 2023, the Company recognized compensation expense for restricted stock units of $653,000 and $529,000, respectively.

As of March 31, 2024, there was $5.9 million of total unrecognized compensation cost related to nonvested restricted stock units granted under the 2019 EIP or 2023 EIP that is expected to be recognized over a weighted-average period of 2.8 years.