Stock Based Compensation

6 Months Ended

Jun. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Based Compensation

19. Stock Based Compensation

At its 2017 Annual Shareholders’ Meeting, the NI Holdings, Inc. 2017 Stock and Incentive Plan (the “Plan”) was approved by shareholders. The purpose of the Plan is to promote the interests of the Company and its shareholders by aiding the Company in attracting and retaining employees, officers, consultants, advisors, and non-employee directors capable of assuring the future success of the Company, to offer such persons incentives to put forth maximum efforts for the success of the Company’s business, to compensate such persons through various stock and cash-based arrangements, and to provide them with opportunities for stock ownership in the Company, thereby aligning the interests of such persons with the Company’s shareholders.

The Plan provides for the grant of nonqualified stock options, incentive stock options, restricted stock units (“RSUs”), stock appreciation rights, dividend equivalents, and performance share units (“PSUs”) to employees, officers, consultants, advisors, non-employee directors, and independent contractors designated by the Compensation Committee of the Board of Directors (the “Compensation Committee”). Awards made under the Plan are based upon, among other things, a participant’s level of responsibility and performance within the Company.

The total aggregate number of shares of common stock that awards may be issued under all awards made under the Plan shall not exceed 500,000 shares of common stock, subject to adjustments as provided in the Plan. No eligible participant may be granted more than 100,000 shares from any stock options, stock appreciation rights, or performance awards denominated in shares, in the aggregate in any calendar year, subject to adjustment in accordance with the Plan. The aggregate amount payable pursuant to all performance awards denominated in cash to any eligible person in any calendar year is limited to $1,000 in value. Directors who are not also employees of the Company may not be granted awards denominated in shares that exceed $100 in any calendar year.

Restricted Stock Units

On December 1, 2017, the Compensation Committee awarded RSUs to non-employee directors and select executives. RSUs are promises to issue actual shares of common stock at the end of a vesting period. The RSUs granted to executives under the Plan were based on salary and generally vest 20% per year over a five-year period, while RSUs granted to non-employee directors vest in May 2018. Dividend equivalents on RSUs are accrued during the vesting period and paid in cash at the end of the vesting period, but are subject to forfeiture until the underlying shares become vested. Participants do not have voting rights with respect to RSUs. On March 1, 2018, the first tranche of executive RSUs vested.

On March 1, 2018, the Compensation Committee awarded additional RSUs to select executives with the same terms as the previous awards.

On May 22, 2018, the RSUs awarded to non-employee directors vested. Additional RSUs were awarded to non-employee directors to vest on the date of the next annual meeting of shareholders.

The Company recognizes stock-based compensation costs based on the grant date fair value over the vesting period of the awards. Estimated forfeitures are included in the determination of compensation costs. No forfeitures are currently estimated.

A summary of the Company’s outstanding RSUs for the six months ended June 30, 2018, is presented below:

	Shares			Weighted- Average Grant- Date Fair Value Per Share
Units outstanding at December 31, 2017		65,500		$	17.31
Grants		40,000			16.25
Vested		(26,200	)		17.31
Units outstanding at June 30, 2018		79,300		$	16.88

The following table shows the impact of RSU activity to the Company’s financial results:

	Three Months Ended June 30,					Six Months Ended June 30,
	2018			2017		2018			2017
RSU compensation expense	$	208		$	—	$	642		$	—
Income tax benefit		(44	)		—		(135	)		—
RSU compensation expense, net of income taxes	$	164		$	—	$	507		$	—

Note: Share-based compensation was not available prior to the Company’s initial public offering in March 2017.

At June 30, 2018, there was $1,021 of unrecognized compensation cost related to outstanding RSUs. That cost is expected to be recognized over a weighted-average period of 3.55 years.

Performance Stock Units

On March 1, 2018, the Compensation Committee awarded PSUs to select executives. PSUs are promises to issue actual shares of common stock at the end of a vesting period, if certain performance conditions are met. The PSUs granted to employees under the Plan were based on salary and include a three-year book value cumulative growth target with threshold and stretch goals. They will vest on the third anniversary of the grant date, subject to the participant’s continuous employment through the vesting date and the level of performance achieved. Dividend equivalents on PSUs are accrued and paid in cash at the end of the performance period in accordance with the level of performance achieved, but are subject to forfeiture until the underlying shares become vested. Participants do not have voting rights with respect to PSUs.

The Company recognizes stock-based compensation costs based on the grant date fair value over the performance period of the awards. Estimated forfeitures are included in the determination of compensation costs. No forfeitures are currently estimated. The current cost estimate assumes that the cumulative growth target will be achieved.

A summary of the Company’s outstanding PSUs for the six months ended June 30, 2018, is presented below:

	Performance Share Units		Weighted-Average Grant-Date Fair Value Per Share
Units outstanding at December 31, 2017		—	$	—
Grants (at target)		48,600		16.25
Units outstanding at June 30, 2018		48,600	$	16.25

The following table shows the impact of PSU activity to the Company’s financial results:

	Three Months Ended June 30,					Six Months Ended June 30,
	2018			2017		2018			2017
PSU compensation expense	$	71		$	—	$	93		$	—
Income tax benefit		(15	)		—		(20	)		—
PSU compensation expense, net of income taxes	$	56		$	—	$	73		$	—

Note: Share-based compensation was not available prior to the Company’s initial public offering in March 2017.  

The PSU grants above represent initial target awards and do not reflect potential increases or decreases resulting from financial performance objectives to be determined at the end of the performance period. The actual number of shares to be issued at the end of the performance period will range from 0% to 150% of the initial target awards.

At June 30, 2018, there was $697 of unrecognized compensation cost related to outstanding PSUs. That cost is expected to be recognized over a weighted-average period of 2.50 years.