LONG-TERM INCENTIVE COMPENSATION

3 Months Ended

Mar. 31, 2020

Employee Benefit and Share-based Payment Arrangement, Noncash Expense [Abstract]

Restricted Stock Awards

We have issued restricted shares to our employees and non-employee directors. The Sixth Amended and Restated Westwood Holdings Group, Inc. Stock Incentive Plan (the “Plan”) reserves shares of Westwood common stock for issuance to eligible employees, directors and consultants of Westwood or its subsidiaries in the form of restricted stock and stock options. In April 2019, stockholders approved an additional 200,000 shares to be authorized under the Plan, increasing the

total number of shares issuable under the Plan (including predecessor plans to the Plan) to 5,048,100 shares. In the event of a change in control of Westwood, the Plan contains provisions providing for the acceleration of the vesting of restricted stock. At March 31, 2020, approximately 286,376 shares remain available for issuance under the Plan.

The following table presents the total stock-based compensation expense recorded for stock-based compensation arrangements for the periods indicated (in thousands):


	Three Months Ended March 31,
	2020		2019
Service condition stock-based compensation expense	$	2,067	$	2,188
Performance condition stock-based compensation expense	419		928
Stock-based compensation expense under the Plan	2,486		3,116
Canadian Plan stock-based compensation expense	130		136
Total stock-based compensation expense	$	2,616	$	3,252

Restricted Stock

Under the Plan, we have granted to employees and non-employee directors restricted stock subject to service conditions and to certain key employees restricted stock subject to both service and performance conditions.

As of March 31, 2020, there was approximately $17.5 million of unrecognized compensation cost for restricted stock grants under the Plan, which we expect to recognize over a weighted-average period of 3.0 years. Our two types of restricted stock grants under the Plan are discussed below.

Restricted Stock Subject Only to a Service Condition

We calculate compensation cost for restricted stock grants by using the fair market value of our common stock at the date of grant, the number of shares issued and an adjustment for restrictions on dividends. This compensation cost is amortized on a straight-line basis over the applicable vesting period, with adjustments for forfeitures recorded as they occur.

The following table details the status and changes in our restricted stock grants subject only to a service condition for the three months ended March 31, 2020:


	Shares	Weighted Average Grant Date Fair Value
Non-vested, January 1, 2020	396,598	$	48.31
Granted	243,344	$	27.54
Vested	(127,812)	$	54.73
Forfeited	(1,811)	$	57.38
Non-vested, March 31, 2020	510,319	$	36.77

Restricted Stock Subject to Service and Performance Conditions

Under the Plan, certain key employees were provided agreements for grants of restricted shares that vest over multiple year periods subject to achieving annual performance goals established by the Compensation Committee of Westwood’s Board of Directors. Each year the Compensation Committee establishes specific goals for that year’s vesting of the restricted shares. The date that the Compensation Committee establishes annual goals is considered to be the grant date and the fair value measurement date to determine expense on the shares that are likely to vest. The vesting period ends when the Compensation Committee formally approves the performance-based restricted stock vesting based on the specific performance goals from the Company’s audited consolidated financial statements. If a portion of the performance-based restricted shares does not vest, no compensation expense is recognized for that portion and any previously recognized compensation expense related to shares that do not vest is reversed.

The following table details the status and changes in our restricted stock grants subject to service and performance conditions for the three months ended March 31, 2020:


	Shares	Weighted Average Grant Date Fair Value
Non-vested, January 1, 2020	80,975	$	49.73

Vested	(35,275)	$	55.11
Non-vested, March 31, 2020	45,700	$	45.58

Canadian Plan

The Share Award Plan of Westwood Holdings Group, Inc. for Service Provided in Canada to its Subsidiaries (the “Canadian Plan”) provides compensation in the form of common stock for services performed by employees of Westwood International Advisors. Under the Canadian Plan, no more than $10 million CDN ($7.1 million in U.S. Dollars using the exchange rate on March 31, 2020) may be funded to the plan trustee for purchases of common stock with respect to awards granted under the Canadian Plan. At March 31, 2020, approximately $1.4 million CDN ($1.0 million in U.S. Dollars using the exchange rate on March 31, 2020) remains available for issuance under the Canadian Plan, or approximately 53,000 shares based on the closing share price of our stock of $18.31 as of March 31, 2020. During the first three months of 2020, the trust formed pursuant to the Canadian Plan purchased 27,474 Westwood common shares in the open market for approximately $0.7 million. As of March 31, 2020, the trust holds 63,712 shares of Westwood common stock. As of March 31, 2020, unrecognized compensation cost related to restricted stock grants under the Canadian Plan totaled $0.7 million, which we expect to recognize over a weighted-average period of 1.7 years.

Mutual Fund Share Incentive Awards

We may grant mutual fund incentive awards, which are bonus awards based on our mutual funds achieving specific performance goals, annually to certain employees. Awards granted are notionally credited to a participant account maintained by us that contains a number of mutual fund shares equal to the award amount divided by the net closing value of a fund share on the date the amount is credited to the account. We maintain the award in a corporate investment account until vesting. The investment may increase or decrease based on changes in the value of the mutual fund shares awarded, including reinvested income from the mutual funds during the vesting period. Unvested mutual fund awards are included under “Investments, at fair value” on our Condensed Consolidated Balance Sheets.

Awards vest over approximately two years of service following the year in which the participant earned the award. We begin accruing a liability for mutual fund incentive awards when we believe it is probable that the award will be earned and record expense for these awards over the service period of the award, which is three years. During the year in which the amount of the award is determined, we record expense based on the expected value of the award. After the award is earned, we record expense based on the value of the shares awarded and the percentage of the vesting period that has elapsed. Our liability under these awards may increase or decrease based on changes in the value of the mutual fund shares awarded, including reinvested income from the mutual funds during the vesting period. Upon vesting, participants receive the value of the mutual fund share awards adjusted for earnings or losses attributable to the underlying mutual funds. For the three months ended March 31, 2020 and 2019, we recorded expense of approximately $9,000 and $8,000, respectively, related to mutual fund share incentive awards. For the three months ended March 31, 2019, we recorded a net $134,000 credit to mutual fund expense, primarily related to the forfeiture of a mutual fund award during the first quarter. As of March 31, 2020 and December 31, 2019, we had an accrued liability of approximately $28,000 and $79,000, respectively, related to mutual fund share incentive awards.