Share-Based Payment Plans

9 Months Ended

Sep. 30, 2022

Share-Based Payment Plans

Share-Based Payment Plans

NOTE 5 — Share-Based Payment Plans

The Company issues incentive and nonqualified stock options and restricted stock awards to certain employees and directors pursuant to its equity incentive plans, which have been approved by the stockholders. Share-based awards are granted by the Compensation Committee of the Board of Directors.

Under the plans, options are granted with an exercise price equal to the fair value of the Company’s stock at the date of the grant. Options granted vest over three or five years and have ten year contractual terms. All options provide for accelerated vesting upon a change in control (as defined in the plans). Restricted shares are granted at the fair value on the date of grant and typically vest over 6 years with a third vesting after years four, five, and six. Restricted shares have the same voting rights as common stock and nonvested restricted shareholders do not have rights to the accrued dividends until vested.

The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below. Expected volatilities are based on peer volatility. The Company uses peer data to estimate option exercise and post-vesting termination behavior. The expected term of options granted is based on peer data and represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

There were no stock options granted during the three and nine months ended September 30, 2022 and 2021.

The following table presents a summary of the activity related to options as of September 30, 2022:

				Weighted
		Weighted		Average
		Average		Remaining
		Exercise		Contractual
	Options	Price		Life (Years)
September 30, 2022
Outstanding at beginning of year	649,600	$	16.66
Granted	—		—
Exercised	(12,332)		22.79
Forfeited	(14,085)		25.20
Expired	—		—
Outstanding at period end	623,183	$	16.35	4.70
Vested or expected to vest	623,183	$	16.35	4.70
Exercisable at period end	521,699	$	14.24	3.90

The Company recognized compensation expense related to options of $112 thousand and $117 thousand for the three months ended September 30, 2022 and 2021, respectively. The Company recognized compensation expense related to options of $347 thousand and $380 thousand for the nine months ended September 30, 2022 and 2021, respectively. At September 30, 2022, unrecognized compensation cost related to nonvested options was approximately $788 thousand and is expected to be recognized over a weighted average period of 1.87 years. The intrinsic value for outstanding options and for options vested or expected to vest was $13.2 million and $12.2 million for exercisable options at September 30, 2022.

Information related to stock option exercises during each period is as follows:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
	(In thousands)
Intrinsic value of options exercised	$	86	$	403	$	166	$	1,275
Cash received from option exercises		7		—		178		21
Excess tax benefit from option exercises		15		78		15		244

The following table presents a summary of the activity related to restricted stock as of September 30, 2022:

		Weighted Average
		Grant Date
	Shares	Fair Value
September 30, 2022
Outstanding at beginning of year	482,750	$	24.59
Granted	—		—
Vested	(25,497)		20.44
Forfeited	(13,750)		24.31
Outstanding at period end	443,503	$	24.84

The Company recognized compensation expense related to restricted stock of $574 thousand and $365 thousand for the three months ended September 30, 2022 and 2021, respectively. The Company recognized compensation expense related to restricted stock of $1.5 million and $1.1 million for the nine months ended September 30, 2022 and 2021, respectively. As of September 30, 2022, there was $6.7 million of total unrecognized compensation cost related to nonvested shares granted under the plan. The cost is expected to be recognized over a weighted-average period of 4.03 years.