XML 28 R16.htm IDEA: XBRL DOCUMENT v3.22.4
Stockholders' Equity and Stock Plans
 12 Months Ended
Dec. 31, 2022
Equity [Abstract]  
Stockholders' Equity and Stock Plans Stockholders' Equity and Stock Plans
Share-Based Awards

On May 12, 2020, our shareholders approved the 2020 Director Stock Plan, replacing and superseding the 2010 Director Stock Plan (collectively "the Plan"). The Plan provides for the payment of director fees in common shares of Bancorp's common stock not to exceed 250,000 shares and a way for directors to purchase shares at fair market value. During 2022, 2021 and 2020 we issued 10,145, 6,443 and 5,723 shares of common stock, respectively, for director fees. As of December 31, 2022, 228,004 shares were available for future director fees and purchases.

The 2017 Employee Stock Purchase Plan ("ESPP") gives our employees an opportunity to purchase Bancorp's common shares through payroll deductions of between one and fifteen percent of their pay. Shares are purchased quarterly at a five percent discount from the closing market price on the last day of the quarter. As of December 31, 2022, 375,450 shares were available for future purchases under the ESPP.

Under the 2017 Equity Plan, the Compensation Committee of the Board of Directors has the discretion to determine, among other things, which employees, advisors and non-employee directors will receive share-based awards, the number and timing of awards, the vesting schedule for each award, and the type of award to be granted. As of December 31, 2022, there were 819,487 shares available for future grants to employees, advisors and non-employee directors. Options are issued at an exercise price equal to the fair value of the stock at the date of grant. Options granted to officers and employees generally vest by one-third on each anniversary of the grant for
three years and expire ten years from the grant date. Options granted to non-employee directors vest immediately and expire ten years from the grant date. Stock options and restricted stock may be net settled in a cashless exercise by a reduction in the number of shares otherwise deliverable upon exercise or vesting in satisfaction of the exercise payment and/or applicable tax withholding requirements. Shares withheld under net settlement arrangements are available for future grants. The table below depicts the total number of shares, amount, and weighted average price withheld for cashless exercises in each of the respective years.
December 31, 2022December 31, 2021December 31, 2020
Number of shares withheld11,505 27,929 10,001 
Total amount withheld (in thousands)$393 $1,085 $398 
Weighted-average price$34.13 $38.85 $39.83 

Performance-based stock awards (restricted stock) are issued to a selected group of employees under the 2017 Equity Plan. Stock award vesting is contingent upon the achievement of pre-established long-term performance goals set by the Compensation Committee of the Board of Directors. Performance is measured over a three-year period and cliff vested. These performance-based stock awards were granted at a maximum opportunity level, and based on the achievement of the pre-established goals, the actual payouts can range from 0% to 200% of the target award. For performance-based stock awards, an estimate is made of the number of shares expected to vest based on the probability that the performance criteria will be achieved to determine the amount of compensation expense to be recognized. The estimate is re-evaluated quarterly and total compensation expense is adjusted for any change in the current period.

A summary of stock option activity for the years ended December 31, 2022, 2021, and 2020 is presented in the following table. The intrinsic value of options outstanding and exercisable is calculated as the number of in-the-money options times the difference between the market price of our stock and the exercise prices of the in-the-money options as of each year-end period presented.
Number of SharesWeighted Average Exercise Price Aggregate Intrinsic Value
(in thousands)		Weighted Average Grant-Date Fair ValueWeighted Average Remaining Contractual Term
(in years)
Options outstanding at December 31, 2019417,382 $28.01 $7,112 5.50
Granted44,632 39.18 6.84 
Cancelled, expired or forfeited(17,222)40.31 
Exercised(73,208)22.26 1,370 
Options outstanding at December 31, 2020371,584 29.92 2,262 5.12
Exercisable (vested) at December 31, 2020315,377 28.05 2,254 4.53
Options outstanding at December 31, 2020371,584 29.92 2,262 5.12
Granted55,861 36.39 8.84 
Cancelled, expired or forfeited(2,008)42.50 
Exercised(60,056)23.01 885 
Options outstanding at December 31, 2021365,381 31.97 2,326 5.57
Exercisable (vested) at December 31, 2021315,744 30.85 2,264 5.15
Options outstanding at December 31, 2021365,381 31.97 2,326 5.57
Granted39,094 34.16 8.49 
Cancelled, expired or forfeited(23,760)37.48 
Exercised(51,010)23.01 617 
Options outstanding at December 31, 2022329,705 33.22 813 5.59
Exercisable (vested) at December 31, 2022287,228 32.81 813 5.15

A summary of the options outstanding and exercisable by price range as of December 31, 2022 is presented in the following table:
Stock Options Outstanding as of December 31, 2022 Stock Options Exercisable as of December 31, 2022
Range of Exercise PricesStock Options OutstandingRemaining Contractual Life (in years)Weighted Average Exercise PriceStock Options ExercisableWeighted Average Exercise Price
$10.00 - $20.00
10,852 0.4$19.69 10,852 $19.69 
$20.01 - $30.00
78,214 2.5$24.64 78,214 $24.64 
$30.01 - $40.00
175,929 6.9$34.58 139,906 $34.41 
$40.01 - $50.00
64,710 6.6$42.17 58,256 $42.40 
329,705 287,228 

The following table summarizes non-vested restricted stock awards and changes during the years ended December 31, 2022, 2021, and 2020.
Number of SharesWeighted Average Grant-Date Fair Value
Non-vested awards at December 31, 201970,066 37.81 
Granted29,100 40.10 
Vested(23,524)36.35 
Cancelled or forfeited(14,314)37.63 
Non-vested awards at December 31, 202061,328 39.50 
Granted30,742 38.00 
Vested(26,392)36.81 
Cancelled or forfeited(3,848)33.96 
Non-vested awards at December 31, 202161,830 40.25 
Granted46,672 34.03 
Vested(12,444)41.49 
Cancelled or forfeited(13,692)41.80 
Non-vested awards at December 31, 202282,366 36.28 

We determine the fair value of stock options at the grant date using the Black-Scholes pricing model that takes into account the stock price at the grant date, exercise price, and the following assumptions (weighted-average shown).
Years ended December 31,
202220212020
Risk-free interest rate1.86 %0.98 %0.91 %
Expected dividend yield on common stock2.85 %2.57 %2.38 %
Expected life in years6.06.16.1
Expected price volatility33.44 %33.12 %24.43 %

The fair value of stock options as of the grant date is recorded as stock-based compensation expense in the consolidated statements of comprehensive (loss) income over the requisite service period, which is generally the vesting period, with a corresponding increase in common stock. Stock-based compensation also includes compensation expense related to the issuance of restricted stock awards. The grant-date fair value of the restricted stock awards, which equals the grant date price, is recorded as compensation expense over the requisite service period with a corresponding increase in common stock as the shares vest. Stock option and restricted stock awards issued include a retirement eligibility clause whereby the requisite service period is satisfied at the retirement eligibility date. For those awards, we accelerate the recording of stock-based compensation when the award holder is eligible to retire. However, retirement eligibility does not affect the vesting of restricted stock or the exercisability of the stock options, which are based on the scheduled vesting period. Total compensation expense for stock options and restricted stock awards was $962 thousand, $972 thousand, and $1.2 million during 2022, 2021, and 2020, respectively, and the total recognized deferred tax benefits related thereto were $257 thousand, $213 thousand, and $341 thousand, respectively.

As of December 31, 2022, there was $1.4 million of total unrecognized compensation expense related to non-vested stock options and restricted stock awards, which is expected to be recognized over a weighted-average
period of approximately 2.1 years. The total grant-date fair value of stock options vested during the years ended December 31, 2022, 2021, and 2020 was $356 thousand, $514 thousand, and $484 thousand, respectively. The total grant-date fair value of restricted stock awards vested during 2022, 2021, and 2020 was $431 thousand, $1.0 million, and $1.2 million, respectively.

We record excess tax benefits (deficiencies) resulting from the exercise of non-qualified stock options, the disqualifying disposition of incentive stock options and vesting of restricted stock awards as income tax benefits (expense) in the consolidated statements of comprehensive (loss) income with a corresponding decrease (increase) to current taxes payable. In 2022, 2021, and 2020 we recognized $3 thousand, $87 thousand, and $120 thousand, respectively, in excess tax benefits recorded as a reduction to income tax expense related to these types of transactions. The tax benefits realized from disqualifying dispositions of incentive stock options were recognized in tax expense to the extent of the book compensation cost recorded.

Dividends
 
Presented below is a summary of cash dividends paid in 2022, 2021 and 2020 to common shareholders, recorded as a reduction from retained earnings. On January 20, 2023, the Board of Directors declared a $0.25 per share cash dividend, paid February 10, 2023 to the shareholders of record at the close of business on February 3, 2023.
 Years ended December 31,
(in thousands except per share data)202220212020
Cash dividends to common stockholders$15,673 $13,107 $12,506 
Cash dividends per common share$0.98 $0.94 $0.92 
 
The holders of unvested restricted stock awards are entitled to dividends on the same per-share ratio as holders of common stock. Tax benefits for dividends paid on unvested restricted stock awards are recorded as tax benefits in the consolidated statements of comprehensive (loss) income with a corresponding decrease to current taxes payable. Dividends on forfeited awards are included in stock-based compensation expense.

Under the California Corporations Code, payment of dividends by Bancorp to its shareholders is restricted to the amount of retained earnings immediately prior to the distribution or the amount of assets that exceeds the total liabilities immediately after the distribution. As of December 31, 2022, Bancorp's retained earnings and amount of total assets that exceeds total liabilities were $270.8 million and $412.1 million, respectively.

Under the California Financial Code, payment of dividends by the Bank to Bancorp is restricted to the lesser of retained earnings or the amount of undistributed net profits of the Bank from the three most recent fiscal years. Under this restriction, approximately $20.1 million of the Bank's retained earnings balance was available for payment of dividends to Bancorp as of December 31, 2022. Bancorp held $4.5 million in cash at December 31, 2022.

Share Repurchase Program

On July 16, 2021, Bancorp Board of Directors approved a share repurchase program under which Bancorp could repurchase up to $25.0 million of its outstanding common stock through July 31, 2023. On October 22, 2021, Bancorp's Board of Directors approved an amendment to the current share repurchase program, which increased the total authorization from $25.0 million to $57.0 million and left the expiration date unchanged. The last activity under the program was in the first quarter of 2022 when the Bancorp repurchased 23,273 shares totaling $877 thousand. A total of $34.7 million remained available to repurchase under the program as of December 31, 2022.

Under the Share Repurchase Program, Bancorp may purchase shares of its common stock through various means such as open market transactions, including block purchases, and privately negotiated transactions. The number of shares repurchased and the timing, manner, price and amount of any repurchases will be determined at Bancorp's discretion. Factors include, but are not limited to, stock price, trading volume and general market conditions, along with Bancorp’s general business conditions. The program may be suspended or discontinued at any time and does not obligate Bancorp to acquire any specific number of shares of its common stock.
As part of the Share Repurchase Program, Bancorp entered into a trading plan adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. The 10b5-1 trading plan permits common stock to be repurchased at times that might otherwise be prohibited under insider trading laws or self-imposed trading restrictions. The 10b5-1 trading plan is administered by an independent broker and is subject to price, market volume and timing restrictions.