STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2024

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

NOTE 20.       STOCK-BASED COMPENSATION

SUMMARY OF STOCK-BASED COMPENSATION

A summary of share activity for all equity classified stock compensation during the year ended December 31, 2024, is presented below.

Type of Award	Shares Outstanding at 1/1/2024		Granted Shares		Vested / Exercised Shares		Expired Shares		Forfeited Shares		Shares Outstanding at 12/31/2024
Equity Classified - Performance Share Awards - Peer Group Market Condition Vesting		237,375		100,391		(85,938)		—		(43,825)		208,003
Equity Classified - Three Year Vest Restricted Shares		216,357		108,391		(75,434)		—		(51,520)		197,794
Total Shares		453,732		208,782		(161,372)		—		(95,345)		405,797

Amounts recognized in the financial statements for stock-based compensation are as follows (in thousands):

	Year Ended
	December 31, 2024		December 31, 2023		December 31, 2022
Total Cost of Share-Based Plans Charged Against Income	$	3,637	$	3,673	$	3,232

EQUITY-CLASSIFIED STOCK COMPENSATION

Performance Share Awards – Peer Group Market Condition Vesting

Performance shares have been granted to certain employees under the 2010 Plan. The performance share awards entitle the recipient to receive, upon the vesting thereof, shares of common stock of the Company equal to between 0% and 150% of the number of performance shares awarded. The number of shares of common stock ultimately received by the award recipient is determined based on the Company’s total stockholder return as compared to the total stockholder return of a certain peer group during a three-year performance period. The Company granted a total of 100,391 performance shares during the year ended December 31, 2024.

The Company used a Monte Carlo simulation pricing model to determine the fair value of its awards that are based on market conditions. The determination of the fair value of market condition-based awards is affected by the Company’s stock price as well as assumptions regarding a number of other variables. These variables include expected stock price volatility over the requisite performance term of the awards, the relative performance of the Company’s stock price and stockholder returns to companies in its peer group, annual dividends, and a risk-free interest rate assumption. Compensation cost is recognized regardless of the achievement of the market conditions, provided the requisite three-year service period is met.

As of December 31, 2024, there was $1.7 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to the outstanding performance share awards, which will be recognized over a remaining weighted average period of 1.7 years.

A summary of the activity for these awards during the years ended December 31, 2024, 2023, and 2022 is presented below: 

Performance Shares With Market Conditions	Shares		Wtd. Avg. Fair Value Per Share
Non-Vested at January 1, 2022		234,354	$	15.67
Granted		69,168	$	20.76
Vested		(73,275)	$	16.76
Expired		—		—
Forfeited		—		—
Non-Vested at December 31, 2022		230,247	$	16.85
Granted		88,754	$	18.10
Vested		(72,141)	$	14.17
Expired		—		—
Forfeited		(9,485)	$	18.10
Non-Vested at December 31, 2023		237,375	$	18.08
Granted		100,391	$	15.28
Vested		(85,938)	$	15.99
Expired		—		—
Forfeited		(43,825)	$	17.67
Non-Vested at December 31, 2024		208,003	$	17.68

Three Year Vest Restricted Shares

Restricted shares have been granted to certain employees under the 2010 Plan. Certain of the restricted shares vest on each of the first, second, and third anniversaries of January 28 of the applicable year provided the grantee is an employee of the Company on those dates. Certain other restricted share awards, granted on July 1, 2022, vest entirely on the third anniversary of the grant date, or July 1, 2025, provided the grantee is an employee of the Company on that date. In addition,

any unvested portion of the restricted shares will vest upon a change in control. The Company granted a total of 108,391 shares of restricted Company common stock during the year ended December 31, 2024.

During the years ended December 31, 2024, 2023, and 2022 the Company’s determination of the fair value of the three-year vest restricted stock awards was calculated by multiplying the number of shares issued by the Company’s stock price at the grant date. Compensation cost is recognized on a straight-line basis over the applicable vesting period.

As of December 31, 2024, there was $1.7 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to the three-year vest non-vested restricted shares, which will be recognized over a remaining weighted average period of 1.6 years.

A summary of the activity for these awards during the years ended December 31, 2024, 2023, and 2022 is presented below: 

Non-Vested Restricted Shares	Shares		Wtd. Avg. Fair Value Per Share
Non-Vested at January 1, 2022		154,509	$	14.96
Granted		137,448	$	19.72
Vested		(72,465)	$	14.96
Expired		—		—
Forfeited		(7,413)	$	17.01
Non-Vested at December 31, 2022		212,079	$	17.97
Granted		96,453	$	19.12
Vested		(74,229)	$	16.00
Expired		—		—
Forfeited		(17,946)	$	19.08
Non-Vested at December 31, 2023		216,357	$	19.07
Granted		108,391	$	16.31
Vested		(75,434)	$	17.80
Expired		—		—
Forfeited		(51,520)	$	18.76
Non-Vested at December 31, 2024		197,794	$	18.12

Non-Qualified Stock Option Awards

Stock option awards have been granted to certain employees under the 2010 Plan. The vesting period of the options awards granted ranged from a period of one to three years. All options had vested as of December 31, 2018. The option expires on the earliest of: (a) the tenth anniversary of the grant date; (b) twelve months after the employee’s death or termination for disability; or (c) thirty days after the termination of employment for any reason other than death or disability. All options had been exercised as of December 31, 2022.

The Company used the Black-Scholes valuation pricing model to determine the fair value of its non-qualified stock option awards. The determination of the fair value of the awards is affected by the stock price as well as assumptions regarding a number of other variables. These variables include expected stock price volatility over the term of the awards, annual dividends, and a risk-free interest rate assumption.

A summary of the activity for these awards during the years ended December 31, 2024, 2023, and 2022 is presented below:

Non-Qualified Stock Option Awards	Shares	Wtd. Avg. Ex. Price		Wtd. Avg. Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Non-Vested at January 1, 2022	64,623	$	14.46
Granted	—		—
Exercised	(64,623)	$	14.46
Expired	—		—
Forfeited	—		—
Non-Vested at December 31, 2022	—	$	—
Granted	—		—
Exercised	—		—
Expired	—		—
Forfeited	—		—
Non-Vested at December 31, 2023	—	$	—
Granted	—		—
Exercised	—		—
Expired	—		—
Forfeited	—		—
Non-Vested at December 31, 2024	—	$	—		—	$	—
Exercisable at January 1, 2024	—	$	—		—	$	—
Exercisable at December 31, 2024	—	$	—		—	$	—

As of December 31, 2024, there is no unrecognized compensation cost related to non-qualified, non-vested stock option awards.

NON-EMPLOYEE DIRECTOR STOCK COMPENSATION

Each member of the Company’s Board of Directors has the option to receive his or her annual retainer and meeting fees in shares of Company common stock rather than cash. The number of shares awarded to the directors making such election is calculated quarterly by dividing (i) the sum of (A) the amount of the quarterly retainer payment due to such director plus (B) meeting fees earned by such director during the quarter, by (ii) the trailing 20-day average price of the Company’s common stock as of the last day of the quarter, rounded down to the nearest whole number of shares.

Each non-employee director serving as of the beginning of each calendar year shall receive an annual award of the Company’s common stock. The value of such award totaled $62,500 for the year ended December 31, 2024, and $35,000 for the years ended December 31, 2023, and 2022 (the “Annual Award”). The number of shares awarded is calculated based on the trailing 20-day average price of the Company’s common stock as of the date two business days prior to the date of the award, rounded down to the nearest whole number of shares. Commencing in 2021, non-employee directors no longer receive meeting fees, but receive additional retainers for service on Board committees, as set forth in the Company’s Non-Employee Director Compensation Policy available on the Company’s website (www.ctoreit.com).

During the years ended December 31, 2024, 2023, and 2022, the expense recognized for the value of the Company’s common stock received by non-employee directors totaled $0.7 million, or 38,068 shares, $0.4 million or 25,147 shares, and $0.5 million or 25,034 shares, respectively. The expense recognized during the years ended December 31, 2024, 2023, and 2022 includes the Annual Award received during the first quarter of each year.