Shareholders' Equity

12 Months Ended

Dec. 31, 2024

Stockholders' Equity Note [Abstract]

Shareholders' Equity

Shareholders’ Equity

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. The current risk-based capital rules, as adopted by federal banking regulators, are based upon guidelines developed by the Basel Committee on Banking Supervision and reflect various requirements of the Dodd-Frank Act (the “Basel III Rules”). The Basel III Rules require banking organizations to, among other things, maintain a minimum ratio of Total Capital to risk-weighted assets, a minimum ratio of Tier 1 Capital to risk-weighted assets, a minimum ratio of “Common Equity

Tier 1 Capital” to risk-weighted assets, and a minimum leverage ratio (calculated as the ratio of Tier 1 Capital to adjusted average consolidated assets). In addition, under the Basel III Rules, in order to avoid limitations on capital distributions, including dividend payments, the Company is required to maintain a 2.5% capital conservation buffer above the adequately capitalized regulatory capital ratios. The net unrealized gain or loss on available for sale securities is not included in computing regulatory capital. At December 31, 2024, the Company and Bank meet all capital adequacy requirements to which they are subject.

Prompt corrective action regulations provide five classifications, including well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At year end 2024 and 2023, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category.

At December 31, 2024, consolidated and bank actual capital and minimum required levels are presented below:

	Actual:				Minimum Required For Capital Adequacy Purposes:				Minimum Required To Be Well-Capitalized Under Prompt Corrective Action Regulations:
	Amount		Ratio		Amount		Ratio ⁽¹⁾		Amount		Ratio
Total Capital (to Risk Weighted Assets)
Consolidated	$	863,999	17.15	%	$	402,996	8.00	%	N/A		N/A
Bank	756,122		15.02		402,638		8.00		$	503,297	10.00	%
Tier 1 (Core) Capital (to Risk Weighted Assets)
Consolidated	$	791,794	15.72	%	$	302,247	6.00	%	N/A		N/A
Bank	715,917		14.23		301,978		6.00		$	402,638	8.00	%
Common Tier 1 (CET 1) Capital Ratio (to Risk Weighted Assets)
Consolidated	$	756,513	15.02	%	$	226,685	4.50	%	N/A		N/A
Bank	715,917		14.23		226,484		4.50		$	327,143	6.50	%
Tier 1 (Core) Capital (to Average Assets)
Consolidated	$	791,794	12.28	%	$	257,936	4.00	%	N/A		N/A
Bank	715,917		11.12		257,468		4.00		$	321,835	5.00	%

(1) Excludes 2.5% capital conservation buffer.

At December 31, 2023, consolidated and bank actual capital and minimum required levels are presented below:

	Actual:				Minimum Required For Capital Adequacy Purposes:				Minimum Required To Be Well-Capitalized Under Prompt Corrective Action Regulations:
	Amount		Ratio		Amount		Ratio ⁽¹⁾		Amount		Ratio
Total Capital (to Risk Weighted Assets)
Consolidated	$	810,391	16.50	%	$	392,870	8.00	%	N/A		N/A
Bank	723,998		14.76		392,402		8.00		$	490,503	10.00	%
Tier 1 (Core) Capital (to Risk Weighted Assets)
Consolidated	$	735,089	14.97	%	$	294,652	6.00	%	N/A		N/A
Bank	688,696		14.04		294,302		6.00		$	392,402	8.00	%
Common Tier 1 (CET 1) Capital Ratio (to Risk Weighted Assets)
Consolidated	$	700,260	14.26	%	$	220,989	4.50	%	N/A		N/A
Bank	688,696		14.04		220,726		4.50		$	318,827	6.50	%
Tier 1 (Core) Capital (to Average Assets)
Consolidated	$	735,089	11.75	%	$	250,162	4.00	%	N/A		N/A
Bank	688,696		11.03		249,642		4.00		$	312,053	5.00	%

(1) Excludes 2.5% capital conservation buffer.

The Company and the Bank at year end 2024 and 2023 were categorized as well-capitalized. There have been no conditions or events that management believes has changed the classification of the Bank under the prompt corrective action regulations since the last notification from regulators. Regulations require the maintenance of certain capital levels at the Bank, and may limit the

dividends payable by the affiliate to the holding company, or by the holding company to its shareholders. At December 31, 2024 the Bank had approximately $150,000 in retained earnings available for payment of dividends to the parent company without prior regulatory approval.

The Company adopted the CECL accounting standard under GAAP effective January 1, 2020. The regulatory capital rules applicable to the Company provided an optional three-year phase-in period for the day-one adverse regulatory capital effects of adopting CECL. In addition, as part of the CARES Act, banking organizations were further permitted to mitigate the estimated cumulative regulatory capital effects of CECL for up to an additional two years. As a result, on January 1, 2022, the Company began the required three-year phase-in by reflecting 25% of the previously deferred estimated capital impact of CECL in its regulatory capital effective January 1, 2022. An additional 25% was phased in on each of January 1, 2023, January 1, 2024 and January 1, 2025. As of January 1, 2025, the adverse cumulative effects of adopting CECL have been fully phased into our regulatory capital.

Equity Plans and Equity Based Compensation

During the periods presented, the Company maintained one equity incentive plan under which stock options, restricted stock, and other equity incentive awards could be granted. The Company’s 2019 Long-Term Equity Incentive Plan (the “2019 LTI Plan”), which authorizes a maximum aggregate issuance of 1,000,000 shares of common stock (subject to certain permitted adjustments), became effective on May 16, 2019, following approval of the Company’s shareholders. It will remain in effect until May 16, 2029, or until all shares of common stock subject to the 2019 LTI Plan are distributed, all awards have expired or terminated, or the plan is terminated pursuant to its terms, whichever occurs first.

Stock Options

Options may be designated as incentive stock options or as nonqualified stock options. While the date after which options are first exercisable is determined by the appropriate committee of the Board of Directors of the Company or, in the case of options granted to directors, by the Board of Directors, no stock option may be exercised after ten years from the date of grant (twenty years in the case of nonqualified stock options). The exercise price of stock options granted pursuant to the plans must be no less than the market value of the Common Stock on the date of the grant.

The plans authorize an optionee to pay the exercise price of options in cash or in common shares of the Company or in some combination of cash and common shares. An optionee may tender already-owned common shares to the Company in exercise of an option. Certain of these plans authorize an optionee to surrender the value of an unexercised option in payment of an equivalent amount of the exercise price of the option. The Company typically issues authorized but unissued common shares upon the exercise of options.

The intrinsic value for stock options is calculated based on the exercise price of the underlying awards and the market price of common stock as of the reporting date. 

During 2024, 2023 and 2022, the Company granted no options, and recorded no stock compensation expense related to option grants. The Company recorded no other stock compensation expense applicable to options during the years ended December 31, 2024, 2023 and 2022.

Restricted Stock

During the periods presented, awards of long-term incentives were granted in the form of restricted stock. Awards granted under the management incentive plan are granted in tandem with cash credit entitlements in the form of 66.67% restricted stock grants and 33.33% cash credit entitlements. The cash portion of an award vests towards the end of the year in which the grant was made, followed by the restricted stock grants vesting 50% in each of the 2nd and 3rd years. For named executive officers, awards are granted in the form of 100% restricted stock grants which will vest in one-third installments on the first, second and third anniversaries of the award date. Awards that are granted to directors as additional retainers for their services do not include any cash credit entitlement. These director restricted stock grants are subject to forfeiture in the event that the recipient of the grant does not continue in service as a director of the Company through the end of the one-year compensation period or does not satisfy certain meeting attendance requirements, at which time they generally vest 100%. For measuring compensation costs, restricted stock awards are valued based upon the market value of the common shares on the date of grant.

The following table presents expense recorded for restricted stock and cash entitlements as well as the related tax effect for the years ended December 31, 2024, 2023, and 2022:

	2024		2023		2022
Restricted Stock Expense	$	3,190	$	2,345	$	2,308
Cash Entitlement Expense	761		750		646
Tax Effect	(1,025)		(803)		(766)
Net of Tax	$	2,926	$	2,292	$	2,188

Unrecognized expense associated with the restricted stock grants and cash entitlements totaled $3,516, $3,519, and $2,781 as of December 31, 2024, 2023, and 2022, respectively.

The following table presents information on restricted stock grants outstanding for the period shown:

	Year Ended December 31, 2024
	Restricted Shares	Weighted Average Market Price at Grant
Outstanding at Beginning of Period	116,632	$	35.34
Granted	102,482	32.10
Issued and Vested	(74,463)	35.83
Forfeited	(10,098)	34.41
Outstanding at End of Period	134,553	32.80

Employee Stock Purchase Plan

The Company’s shareholders approved the Company’s 2019 Employee Stock Purchase Plan on May 16, 2019, as well as an Amended and Restated 2019 Employee Stock Purchase Plan on May 21, 2020, which was amended and restated to reflect certain clarifying changes (the “2019 ESPP”). The 2019 ESPP provides for a series of 3-month offering periods, commencing on the first day and ending on the last trading day of each calendar quarter, for the purchase of the Company’s common stock by participating employees. The purchase price of the shares has been set at 95% of the fair market value of the Company’s common stock on the last trading day of the offering period. A total of 750,000 common shares has been reserved for issuance under the 2019 ESPP. The 2019 ESPP will continue until September 30, 2029, or, if earlier, until all of the shares of common stock allocated to the 2019 ESPP have been purchased. Funding for the purchase of common stock is from employee and Company contributions.

In 2024, the Company recorded $22 of expense, $17 net of tax, for the employee stock purchase plan. In 2023, the Company recorded $29 of expense, $22 net of tax, for the employee stock purchase plan. In 2022, the Company recorded $53 of expense, $39 net of tax, for the employee stock purchase plan. There was no unrecognized compensation expense as of December 31, 2024, 2023 and 2022 for the Employee Stock Purchase Plans.

Stock Repurchase Plan

The Company’s Board of Directors previously approved a plan to repurchase up to one million shares of the Company’s outstanding common stock. On a share basis, the amount of common stock subject to the repurchase plan represented approximately 3% of the Company’s outstanding shares on the date it was approved. The Company is not obligated to purchase shares under the plan, and the plan may be discontinued at any time. The actual timing, number and share price of shares purchased under the repurchase plan will be determined by the Company at its discretion and will depend upon such factors as the market price of the stock, general market and economic conditions and applicable legal requirements. The Company has not repurchased an shares under this repurchase plan.

In August 2022, the Inflation Reduction Act of 2022 (the “IRA”) was enacted. Among other things, the IRA imposes a 1% excise tax on the fair market value of stock repurchased after December 31, 2022 by publicly traded U.S. corporations, like the Company. With certain exceptions, the value of stock repurchased is determined net of stock issued in the year, including shares issued pursuant to compensatory arrangements.