SHARE-BASED COMPENSATION

12 Months Ended

Dec. 31, 2023

Share-Based Payment Arrangement [Abstract]

The Company awards its employees and directors various forms of share-based incentives under certain plans approved by its shareholders. Awards granted under the plans may be in the form of qualified or nonqualified stock options, restricted stock, stock appreciation rights (“SARs”), long-term incentive compensation units consisting of cash and common stock, or any combination thereof within the limitations set forth in the plans. The plans provide that the aggregate number of shares of the Company’s common stock which may be subject to award may not exceed 2,784,262 subject to adjustment in certain circumstances to prevent dilution. At December 31, 2023, there were 2,382,880 shares available to be issued under the plans.

All stock options have an exercise price that is equal to the closing fair market value of the Company’s stock on the date the options were granted. Options granted under the plans generally vest over a five-year period and have a 10-year maximum term.

The Company did not grant any options during 2023, 2022 or 2021. As of December 31, 2023, there was no unrecognized compensation cost related to options.

As of December 31, 2023, the Company has 257,673 outstanding restricted shares granted under the plans as compensation to certain employees and directors. These shares carry dividend and voting rights. Sales of these shares are restricted prior to the date of vesting, which is one to five years from the date of the grant. Shares issued under the plans are recorded at their fair market value on the date of their grant. The compensation expense is recognized on a straight-line basis over the related vesting period. In 2023, 2022 and 2021, compensation expense related to these grants was approximately $5.3 million, $4.4 million, and $5.3 million, respectively. The total income tax benefit related to these grants was approximately $770,000, $293,000 and $338,000 in 2023, 2022 and 2021, respectively.

It is the Company’s policy to issue new shares for stock option exercises and restricted stock rather than issue treasury shares. The Company recognizes share-based compensation expense on a straight-line basis over the options’ related vesting term. The Company did not record any share-based compensation expense related to stock options during 2023, 2022 and 2021. The total income tax benefit related to stock options was approximately $41,000, $339,000 and $631,000 in 2023, 2022 and 2021, respectively.

A summary of the activity of non-performance-based options as of and for the years ended December 31, 2023, and 2022 is presented below.


	2023						2022
	Shares	Weighted Average Exercise Price		Weighted Average Contractual Term	Aggregate Intrinsic Value $ (000)		Shares	Weighted Average Exercise Price		Weighted Average Contractual Term	Aggregate Intrinsic Value $ (000)
Under option, beginning of year	16,000	$	29.69				117,135	$	28.79


Exercised	(16,000)	29.69			$	258	(97,135)	29.22			$	1,936
Forfeited	—	—					(4,000)	29.31
Under option, end of year	—	$	—	0.00	$	—	16,000	$	29.69	0.05	$	279
Exercisable at end of year	—	$	—	0.00	$	—	16,000	$	29.69	0.05	$	279

A summary of the status of the Company’s restricted stock awards as of and for the years ended December 31, 2023, and 2022 is presented below.


	2023			2022
	Shares	Weighted Average Grant Date Fair Value		Shares	Weighted Average Grant Date Fair Value
Nonvested shares at beginning of year	222,280	$	43.31	225,869	$	38.06
Granted	133,430	44.84		165,686	47.67
Vested	(95,954)	37.99		(154,386)	40.72
Forfeited	(2,083)	48.00		(14,889)	38.92
Nonvested shares at end of year	257,673	46.05		222,280	43.31

The balance of unearned compensation related to restricted stock grants as of December 31, 2023, 2022 and 2021 was approximately $6.1 million, $5.6 million, and $3.8 million, respectively. At December 31, 2023, the cost is expected to be recognized over a weighted-average period of 1.7 years.

During 2023 and 2022, the Company issued 42,242 and 35,108 performance stock units ("PSUs") with a weighted average grant date fair value of $49.21 and $47.71, respectively, subject to a performance condition tied to tangible book value growth over a three-year period. The 2023 tangible book value awards also contain a potential modifier subject to a total shareholder return ("TSR") performance metric The Company also granted 42,245 and 35,108 PSUs in 2023 and 2022, respectively, subject to a three-year performance metric of return on tangible common equity relative to a market index with a potential modifier subject to a TSR performance metric with a weighted average grant date fair value of $49.21 and $48.53, respectively. The fair value of the PSUs subject to TSR at the grant date was determined using a Monte Carlo simulation method. The Company communicates threshold, target and maximum performance PSUs and performance targets to the applicable employees at the beginning of the performance periods. Dividends are not paid in respect of the awards during the performance period, although dividend equivalents do accrue over the life of the award and will vest, if at all, at the same time as the PSUs to

which they relate. The number of PSUs that ultimately vest at the end of the three-year performance period, if any, will be based on the Company's performance relative to the applicable performance metrics. In 2023, 2022 and 2021, the Company recognized compensation cost related to these grants of approximately $4.6 million, $2.3 million and $2.6 million, respectively. The balance of unearned compensation related to PSU grants as of December 31, 2023, 2022 and 2021 was approximately $4.4 million, $3.1 million and $3.2 million, respectively.

A summary of the Company's nonvested PSUs for the years ended December 31, 2023, and 2022 is presented below:


	2023			2022
	Shares	Weighted Average Grant Date Fair Value		Shares	Weighted Average Grant Date Fair Value
Nonvested units at beginning of year	110,254	$	47.15	121,270	$	32.71
Granted	84,487	49.21		70,216	48.12
Vested	(43,182)	45.65		(68,955)	24.88
Forfeited	(4,947)	48.92		(12,277)	35.19
Nonvested units at end of year	146,612	48.72		110,254	47.15