Share-Based Compensation

9 Months Ended

Sep. 30, 2024

Share-Based Payment Arrangement [Abstract]

In May 2015, the Company adopted the Central Valley Community Bancorp 2015 Omnibus Incentive Plan (2015 Plan). The plan provides for awards in the form of stock options, stock appreciation rights, and restricted stock. The plan also allows for performance awards that may be in the form of cash or shares of the Company’s common stock. With respect to stock options and restricted stock the exercise price in the case of stock options and the grant value in the case of restricted stock may not be less than the fair market value at the date of the award. The options and awards under the plan expire on dates determined by the Board of Directors, but not later than ten years from the date of grant. The vesting period for stock options and restricted stock rights is determined by the Board of Directors and ranges one to five years. The maximum number of shares that can be issued with respect to all awards under the plan is 875,000. Currently under the 2015 Plan, 189,325 shares remain reserved for future grants as of September 30, 2024.

Share-based compensation cost recognized for those plans was $253,000 and $621,000 for the three and nine months ended September 30, 2024, respectively, and $170,000 and $689,000 for the three and nine months ended September 30, 2023, respectively. The recognized tax benefit for the share-based compensation expense, forfeitures of restricted stock, and exercise of stock options, resulted in the recognition of $8,000 and $14,000 for the three and nine months ended September 30, 2024, and $0 for the three and nine months ended September 30, 2023, respectively.

Stock Option Awards

The Company bases the fair value of the stock options granted on the date of grant using a Black-Scholes Merton option pricing model that uses assumptions based on expected option life and the level of estimated forfeitures, expected stock volatility, risk free interest rate, and dividend yield. The expected term and level of estimated forfeitures of the Company’s stock options are based on the Company’s own historical experience. Stock volatility is based on the historical volatility of the Company’s stock. The risk-free interest rate is based on the U. S. Treasury yield curve for the periods within the contractual life of the stock options in effect at the time of grant. The compensation cost for stock options granted is based on the weighted average grant date fair value per share.

A summary of the activity of the Company’s stock options for the nine months September 30, 2024 follows:


	Number of Shares	Weighted Average Exercise Price
Options outstanding at December 31, 2023	—	$	—
Options issued at acquisition	390,462	13.23
Options granted	—	—
Options exercised	(8,335)	12.34
Options expired	(38,710)	12.01
Options outstanding at September 30, 2024	343,417	$	13.39

The significant assumptions used to estimate fair value of the issued options at the time of the acquisition included: risk free rate 4.35%; dividend rate 4.31%, expected volatility 46.95%, and a weighted average expected term of 4.92 years.

Information related to the stock option plan is as follows (in thousands):


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023

Intrinsic value of options exercised	$	26	$	—	$	51	$	—
Cash received from options exercised	40		—		103		—
Excess tax expense realized for option exercises	8		—		14		—


	Currently Exercisable		Currently Not Exercisable		Total Outstanding
Number of options	343,417		—		343,417
Weighted average exercise price	$	13.39	$	—	$	13.39
Intrinsic value (in thousands)	$	2,010	$	—	$	2,010
Weighted average remaining contractual term (yrs.)	4.10		—		4.10

As of September 30, 2024, there is no unrecognized compensation cost related to stock options granted under the Plan. All options are fully vested and exercisable.

Restricted Stock and Common Stock Awards

The 2015 Plan provides for the issuance of restricted common stock to directors and officers and common stock awards based on the achievement of performance goals as determined by the Board of Directors or in accordance with executive employment agreements. Restricted common stock grants typically vest over a one to five-year period. Restricted common stock is subject to forfeiture if employment terminates prior to vesting. The cost of these awards is recognized over the vesting period of the awards based on the fair value of our common stock on the date of the grant.

The shares awarded to employees and directors under the restricted stock agreements vest on applicable vesting dates only to the extent the recipient of the shares is then an employee or a director of the Company or one of its subsidiaries, and each recipient will forfeit all of the shares that have not vested on the date his or her employment or service is terminated. Common stock awards for performance vest immediately. Holders of restricted stock awards receive non-forfeitable dividends at the same rate as common stockholders and they both share equally in undistributed earnings. Therefore, under the two-class method the difference in EPS is not significant for these participating securities.

The following table summarizes restricted stock activity for the nine months ended September 30, 2024 as follows:


	Shares	Weighted Average Grant-Date Fair Value
Nonvested outstanding shares at December 31, 2023	75,133	$	15.65
Granted	72,360	16.93
Vested	(46,339)	15.02
Forfeited	(695)	15.60
Nonvested outstanding shares at September 30, 2024	100,459	$	16.86

As of September 30, 2024, there were 100,459 shares of restricted stock that are nonvested and expected to vest. As of September 30, 2024, there was $1,359,000 of total unrecognized compensation cost related to nonvested restricted common stock awards. Restricted stock compensation expense is recognized on a straight-line basis over the vesting period. This cost is expected to be recognized over a weighted-average remaining period of 2.25 years and will be adjusted for subsequent changes in estimated forfeitures. Restricted common stock awards had an intrinsic value of $809,000 at September 30, 2024.