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Note 16 - Stock Based Compensation

12 Months Ended

Dec. 31, 2024

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

NOTE 16 - STOCK BASED COMPENSATION

RBB Bancorp 2010 Stock Option Plan

Under the RBB Bancorp 2010 Stock Option Plan (the “2010 Plan”), we were permitted to grant awards to eligible persons in the form of qualified and non-qualified stock options. We reserved up to 30% of the issued and outstanding shares of common stock as of the date we adopted the 2010 Plan, or 3,494,478 shares, for issuance under the 2010 Plan. Following receipt of shareholder approval of the 2017 Omnibus Stock Incentive Plan (the “OSIP”) in May 2017, no additional grants were made under the 2010 Plan. The 2010 Plan has been terminated and options that were granted under the 2010 Plan have become subject to the OSIP. Awards that were granted under the 2010 Plan will remain exercisable pursuant to the terms and conditions set forth in individual award agreements, but such awards will be assumed and administered under the OSIP. The 2010 Plan award agreements allow for acceleration of exercise privileges of grants upon occurrence of a change in control of the Company. If a participant’s job is terminated for cause, then all unvested awards expire at the date of termination.

Amended and Restated RBB Bancorp 2017 Omnibus Stock Incentive Plan

The Amended and Restated RBB Bancorp 2017 Omnibus Stock Incentive Plan (the “Amended OSIP”) was approved by our board of directors in January 2019 and approved by our shareholders in May 2022. The Amended OSIP was designed to ensure continued availability of equity awards that will assist us in attracting and retaining competent managerial personnel and rewarding key employees, directors and other service providers for high levels of performance. Pursuant to the Amended OSIP, our board of directors are allowed to grant awards to eligible persons in the form of qualified and non-qualified stock options, restricted stock, restricted stock units, stock appreciation rights and other incentive awards. We have reserved up to 30% of issued and outstanding shares of common stock as of the date we adopted the Amended OSIP, or 3,848,341 shares. As of December 31, 2024, there were 1,004,658 shares of common stock available for issuance under the Amended OSIP. This represents 5.7% of the issued and outstanding shares of the Company’s common stock as of December 31, 2024. Awards vest, become exercisable and contain such other terms and conditions as determined by the board of directors and set forth in individual agreements with the employees receiving the awards. The Amended OSIP enables the board of directors to set specific performance criteria that must be met before an award vests. The Amended OSIP allows for acceleration of vesting and exercise privileges of grants if a participant’s termination of employment is due to a change in control, death or total disability. If a participant’s job is terminated for cause, then all awards expire at the date of termination.

We recognized total stock-based compensation expense of $1.1 million, $750,000, and $848,000 in 2024, 2023, and 2022. The total unrecognized stock-based expense totaled $1.9 million, $517,000, and $581,000 as of December 31, 2024, 2023, and 2022.

Stock Options

Compensation expense for stock options was $62,000, $246,000, and $300,000 for the years ended December 31, 2024, 2023, and 2022. Unrecognized stock-based compensation expense related to options was $117,000, $179,000, and $400,000 as of December 31, 2024, 2023, and 2022. Unrecognized compensation expense related to stock options, as of December 31, 2024, is expected to be recognized over the next 2.3 years.

The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions presented below for 2023 and 2022. No stock options have been granted after March 31, 2023.

		March 2023				December 2022				May 2022
Expected volatility			28.4	%			28.9	%			29.5	%
Expected term (years)			8.0				8.0				6.0
Expected dividends			2.92	%			2.55	%			2.52	%
Risk free rate			4.27	%			4.00	%			2.71	%
Grant date fair value		$	5.49			$	6.16			$	5.28

The expected volatility was based on the historical volatility of our stock trading history. The expected term of options granted is based on historical data and represents the period of time that options granted are expected to be outstanding. The risk free rate of return reflects the grant date interest rate offered for zero coupon U.S. Treasury bonds over the expected term of the options.

The table below presents a summary of our stock option awards and activity as of and for the year ended December 31, 2024:

										*Weighted-*
						*Weighted-*				*Average*
						*Average*				*Remaining*				*Aggregate*
						*Exercise*				*Contractual*				*Intrinsic*
		*Shares*				*Price*				*Term in years*				*Value*
Outstanding at beginning of year			397,903			$	17.61
Exercised			(112,250	)			16.40
Forfeited/cancelled			(111,153	)			17.75
Outstanding at end of period			174,500			$	18.29				5.04			$	406

Options exercisable			153,167			$	17.88				4.64			$	406

The total fair value of the shares vested was $581,000, $1.1 million, and $1.1 million in 2024, 2023, and 2022. Unvested stock options totaled 21,333, 65,671, and 127,005 with a weighted average grant date fair value of $6.02, $4.99, and $4.69 as of December 31, 2024, 2023 and 2022. The decrease of unvested stock options during 2024 was due to 28,337 stock options vested with a weighted average grant date stock price of $18.18, and 16,001 stock options exercised with a weighted average grant date stock price of $19.03.

Cash received from the exercise of 112,250 share options was $1.8 million for the year ended December 31, 2024. Cash received from the exercise of 19,403 share options was $295,000 for the year ended December 31, 2023. Cash received from the exercise of 445,308 share options was $5.5 million for the year ended December 31, 2022. The intrinsic value of options exercised was $429,000, $90,000, and $4.0 million in 2024, 2023, and 2022.

Restricted Stock Units

We award time-based restricted stock units (“TRSUs”) and performance-based restricted stock units (“PRSUs”), which we also refer to collectively as restricted stock units (“RSUs”). We granted 138,668 RSUs during the year ended December 31, 2024, with a weighted average price of $18.37. The RSUs granted during the year ended December 31, 2024 included 31,270 PRSUs with an estimated fair value as of the March 20, 2024 grant date of $19.13 and are subject to pre-established performance metrics with market conditions that will be measured in the future and subject to oversight and approval by the Board of Director’s Compensation Committee. The TRSUs have original lives ranging from 1 to 4 years and PRSUs have an original life of 3 years. As of December 31, 2024, there were 140,475 unvested RSUs outstanding.

The recorded compensation expense for RSUs was $994,000, $504,000, and $453,000 for the years ended December 31, 2024, 2023, and 2022. Unrecognized stock-based compensation expense related to RSUs was $1.8 million and $338,000 as of December 31, 2024 and 2023. As of December 31, 2024, unrecognized stock-based compensation expense related to RSUs is expected to be recognized over the next 2.3 years.

The following table presents restricted stock unit activity during the twelve months ended December 31, 2024.

						*Weighted-Average*
						*Grant Date*
		*Shares*				*Fair Value*
Outstanding at beginning of year			43,160			$	18.89
Granted			138,668				18.37
Vested			(41,353	)			19.05
Outstanding at end of period			140,475				18.33