XML 46 R22.htm IDEA: XBRL DOCUMENT

Stock-Based Compensation

12 Months Ended

Dec. 31, 2020

(13)	Stock-Based Compensation

The Corporation has issued stock options under the Meridian Bank 2004 Stock Option Plan (2004 Plan). The 2004 Plan authorized the Board of Directors to grant options up to an aggregate of 446,091 shares, as adjusted for the 5% stock dividends in 2012, 2014 and 2016 to officers, other employees and directors of the Corporation. No additional shares are available for future grants. The shares granted under the 2004 Plan to directors are nonqualified options. The shares granted under the 2004 Plan to officers and other employees are incentive stock options, and are subject to the limitations under Section 422 of the Internal Revenue Code.

The Meridian Bank 2016 Equity Incentive Plan (2016 Plan) was amended on May 24, 2019 to authorize the Board of Directors to grant up to an aggregate of 686,900 stock awards that can take different forms, as adjusted for the 2016 5% stock dividend. A total of 296,100 stock options and 33,208 shares of restricted stock have been granted under the 2016 Plan through December 31, 2020. As of December 31, 2020 there were 355,992 stock awards remaining to be issued. Options granted under the 2016 Plan to directors are nonqualified options, while options granted to officers and other employees are incentive stock options, and are subject to the limitations under Section 422 of the Internal Revenue Code.

Stock Options

Stock-based compensation cost is measured at the grant date, based on the fair value of the award and is recognized as an expense over the vesting period. The fair value of stock option grants is determined using the Black-Scholes pricing model. The assumptions necessary for the calculation of the fair value are expected life of options, annual volatility of stock price, risk-free interest rate and annual dividend yield.

Stock option awards granted under the 2016 Plan have a term that does not exceed ten years and vest according to each award’s specific vesting schedule. Currently, all option awards granted to date vest 25% upon grant and become fully exercisable after three years of service from the grant date.

The following table provides information about stock options outstanding as of December 31, 2020 and 2019:


		Weighted		Weighted
		Average		Average
		Exercise		Grant Date
	Shares	Price		Fair Value
Outstanding at December 31, 2018	274,070	$	15.88	$	4.46
Exercised	(689)		11.79		3.89
Granted	73,000		17.03		4.90
Forfeited	—		—		—
Outstanding at December 31, 2019	346,381		16.13		4.55
Exercised	(14,673)		13.64		3.74
Granted	94,650		17.70		5.07
Forfeited	(25,631)		17.03		4.73
Outstanding at December 31, 2020	400,727		16.53		4.69
Exercisable at December 31, 2020	277,339		16.10		4.52
Nonvested at December 31, 2020	123,388	$	17.51	$	5.08

The weighted average remaining contractual life of the outstanding stock options at December 31, 2020 is 7.1 years. At December 31, 2020 the range of exercise prices is $10.36 to $20.89. The aggregate intrinsic value of options outstanding and exercisable was $1.7 million and $1.3 million, respectively, as of December 31, 2020.

The fair value of each option granted in 2020 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: dividend yield of 0.0%, risk-free interest rate of between 0.47% and 1.68%, expected life of 5.75 years, and expected volatility of between 21.81% and 39.65% based on an average of the Corporation’s share price since going public and the expected volatility of similar public financial institutions in the Corporation’s market area for the period before the Corporation went public. The weighted average fair value of options granted in 2020 was $4.47 to $5.87 per share.

The fair value of each option granted in 2019 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: dividend yield of 0.0%, risk-free interest rate of between 1.95% and 2.61%, expected life of 5.75 years, and expected volatility of 22.44% and 22.48% based on an average of the Corporation’s share price since going public and the expected volatility of similar public financial institutions in the Corporation’s market area. The weighted average fair value of options granted in 2019 was $4.84 to $5.30 per share.

Total stock compensation cost for the twelve months ended December 31, 2020 and December 31, 2019 was $451 thousand and $272 thousand, respectively. During the twelve months ended December 31, 2020 and December 31, 2019, the Corporation received $200 thousand and $128 thousand from the exercise of stock options, respectively. There were no tax benefits recognized related to stock compensation cost for the twelve months ended December 31, 2020 and 2019.

In accordance with ASU 2016-09 – Compensation – Stock Compensation (ASU 2016-09), forfeitures are recognized as they occur instead of applying an estimated forfeiture rate to each grant. For purposes of the determination of stock-based compensation expense for the year ended December 31, 2020, we recognized the forfeiture of 25,631 of shares of stock options that were previously granted to officers and other employees.

As of December 31, 2020, there was $401 thousand of unrecognized compensation cost related to nonvested stock options. This cost will be recognized over a weighted average period of 1.33 years.

Restricted Stock

The restricted stock granted under the 2016 Plan vest according to each award’s specific vesting schedule. All awards granted in 2020 vest 50% one year from the grant date and the remaining 50% on the second anniversary of the grant date. The grant date fair value of the restricted stock is based on the closing price on the date prior to the grant.


		Weighted		Weighted
		Average		Average
		Exercise		Grant Date
	Shares	Price		Fair Value
Outstanding at December 31, 2019	—		—		—
Granted	33,208		14.00		14.00
Vested	—		—		—
Forfeited	—		—		—
Outstanding at December 31, 2020	33,208		14.00		14.00
Nonvested at December 31, 2020	33,208	$	14.00	$	14.00

Compensation expense for restricted stock is measured based on the market price of the stock on the day prior to the grant date and is recognized on a straight-line basis over the vesting period. For the year ended December 31, 2020, the Corporation recognized $80 thousand of expense related to the restricted stock. As of December 31, 2020, there was $385 thousand in unrecognized compensation costs related to restricted stock. This cost will be recognized over a weighted average period of 0.62 years.