Share-Based Compensation

12 Months Ended

Dec. 31, 2023

Share-Based Compensation

Share-Based Compensation

Note 19—Share-Based Compensation

Compensation cost is recognized for stock options, restricted stock awards and restricted stock units (“RSUs”) issued to employees. Compensation cost is measured as the fair value of these awards on their date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used as the fair value of restricted stock awards and RSUs. Compensation cost is recognized over the required service period, generally defined as the vesting period for stock option awards and RSUs, and as the restriction period for restricted stock awards. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.

Our 2004, 2012, 2019 and 2020 share-based compensation plans are long-term retention plans intended to attract, retain, and provide incentives for key employees and non-employee directors in the form of incentive and non-qualified stock options, restricted stock, and RSUs. Our 2020 plan was adopted by our shareholders at our annual meeting on October 29, 2020. The Company also assumed the obligations of Atlantic Capital under various equity incentive plans pursuant to the acquisition of Atlantic Capital on March 1, 2022 and the obligations of CenterState Bank Corporation (“CenterState”) under various equity incentive plans pursuant to the merger with CenterState on June 7, 2020.

Stock Options

With the exception of non-qualified stock options granted to directors under the 2004 and 2012 plans, which in some cases may be exercised at any time prior to expiration and in some other cases may be exercised at intervals less than a year following the grant date, incentive stock options granted under our 2004, 2012, 2019 and 2020 plans may not be exercised in whole or in part within a year following the date of the grant, as these incentive stock options become exercisable in 25% increments pro ratably over the four-year period following the grant date. The options are granted at an exercise price at least equal to the fair value of the common stock at the date of grant and expire ten years from the date of grant. No options were granted under the 2004, 2012 or 2019 plans after January 26, 2012, February 1, 2019, and October 29, 2020, respectively, and the plans are closed other than for any options still unexercised and outstanding. The 2020 plan is the only plan from which new share-based compensation grants may be issued. It is the Company’s policy to grant options out of the 2,072,245 shares registered under the 2020 plan.

Activity in the Company’s stock option plans is summarized in the following table. All information has been retroactively adjusted for stock dividends and stock splits.

	Year Ended December 31,
	2023			2022			2020
		Weighted			Weighted			Weighted
		Average			Average			Average
		Exercise			Exercise			Exercise
	Shares	Price		Shares	Price		Shares	Price
Outstanding at January 1, 2023	161,832	$	66.20	185,125	$	63.03	256,425	$	59.01
Assumed stock options and warrants from ACBI merger	—		—	23,410		40.73	—		—
Exercised	(48,749)		55.88	(43,525)		41.16	(64,075)		45.35
Forfeited	—		—	(356)		38.31	(6,250)		85.42
Expired	(5,491)		32.25	(2,822)		36.98	(975)		24.37
Outstanding at December 31, 2023	107,592		72.60	161,832		66.20	185,125		63.03
Exercisable at December 31, 2023	107,592		72.60	161,832		66.20	185,125		63.03

The aggregate intrinsic value of 107,592, 161,832, and 185,125 stock options outstanding and exercisable at December 31, 2023, 2022, and 2021 was $1.7 million, $2.5 million, and $3.8 million, respectively. The aggregate intrinsic value of 48,749, 43,525, and 64,075 stock options exercised for the years ended December 31, 2023, 2022, and 2021 was $1.1 million, $1.7 million and $2.3 million, respectively.

Information pertaining to options outstanding at December 31, 2023 is as follows:

					Options Outstanding					Options Exercisable
						Weighted					Weighted
						Average					Average
						Remaining		Weighted			Remaining		Weighted
Range of					Number	Contractual		Average		Number	Contractual		Average
Exercise Prices					Outstanding	Life		Exercise Price		Outstanding	Life		Exercise Price
$	37.72	-	$	40.00	4,348	1.1	years	$	38.32	4,348	1.1	years	$	38.32
$	40.01	-	$	55.00	27,539	2.9	years	$	45.42	27,539	2.9	years	$	45.42
$	55.01	-	$	70.00	18,536	1.2	years	$	63.93	18,536	1.2	years	$	63.93
$	85.01	-	$	91.35	57,169	3.6	years	$	91.12	57,169	3.6	years	$	91.12
					107,592	2.7	years	$	72.60	107,592	2.7	years	$	72.60

The fair value of options is estimated at the date of grant using the Black-Scholes option pricing model and expensed over the options’ vesting periods. We have not granted any stock options for the years ended December 31, 2023, 2022 and 2021, and therefore, we have not used the Black-Scholes option pricing model to fair value options.

As of December 31, 2023, 2022 and 2021, there were no unrecognized compensation costs related to non-vested stock option grants under the plans. There was no fair value of shares vesting during the years ended December 31, 2023, 2022 and 2021 and no compensation expense was recorded in 2023, 2022, and 2021.

Restricted Stock

From time-to-time, we grant shares of restricted stock to key employees. These awards help align the interests of these employees with the interests of our shareholders by providing economic value directly related to increases in the value of our stock. The value of the stock awarded is established as the fair market value of the stock at the time of the grant. We recognize expenses equal to the total value of such awards, ratably over the vesting period of the stock grants. Restricted stock grants to employees generally vest ratably over a two to four-year vesting period.

All restricted stock agreements are conditioned upon continued employment. Termination of employment prior to a vesting date, as described below, would terminate any interest in non-vested shares. Prior to vesting of the shares, as long as employed by the Company, the employees will have the right to vote such shares and to receive dividends paid with respect to such shares. All restricted shares will fully vest in the event of change in control of the Company or upon the death of the recipient.

Non-vested restricted stock for the year ended December 31, 2023 is summarized in the following table. All information has been retroactively adjusted for stock dividends and stock splits.

		Weighted-
		Average
		Grant-Date
Restricted Stock	Shares	Fair Value
Nonvested at January 1, 2023	50,506	$	89.12
Vested	(31,537)		89.29
Forfeited	(2,721)		90.00
Nonvested at December 31, 2023	16,248	$	88.63

The Company granted no restricted stock shares for the years ended December 31, 2023, 2022, and 2021. Due to the acquisition of ACBI, effective March 1, 2022, a total of 84,224 restricted stock awards were assumed by the Company. Compensation expense of $1.8 million, $3.8 million and $370,000 was recorded in 2023, 2022, and 2021, respectively.

The vesting schedule of these shares as of December 31, 2023 is as follows:

	Shares
2024	11,373
2025	4,875
	16,248

As of December 31, 2023, there was $598,000 of total unrecognized compensation cost related to non-vested restricted stock granted under the plans. The cost is expected to be recognized over a weighted-average period of 0.75 years as of December 31, 2023. The total fair value of shares vested during the years ended December 31, 2023, 2022 and 2021 was approximately $2.4 million, $2.5 million, and $448,000, respectively.

Restricted Stock Units (“RSU”)

From time-to-time, we also grant performance RSUs and time-vested RSUs to key employees, and time-vested RSUs to non-employee directors. These awards help align the interests of these employees with the interests of our shareholders by providing economic value directly related to our performance. Some performance RSU grants contain a three-year performance period while others contain a one to two-year performance period and a time-vested requirement (generally two to four years from the grant date). The performance-based awards for our long-term incentive plans are dependent on the achievement of tangible book value growth and return on average tangible common equity relative to the Company’s peer group during each three-year performance period. In December 2022, the Company’s Compensation Committee approved a modification to the long-term incentive plans to exclude the changes in accumulated other comprehensive income from the calculation of tangible book value growth per share. Grants to non-employee directors typically vest within a 12-month period. We communicate threshold, target, and maximum performance RSU awards and performance targets to the applicable key employees at the beginning of a performance period. Due to the merger with CenterState on June 7, 2020, all legacy and assumed performance-based restricted stock units converted to a time-vesting requirement. With respect to some long-term incentive awards, dividend equivalents are accrued at the same rate as cash dividends paid for each share of the Company’s common stock during the performance or time-vested period, and subsequently paid when the shares are issued on the vesting or settlement date. The value of the RSUs awarded is established as the fair market value of the stock at the time of the grant. We recognize expense on a straight-line basis typically over the performance or time-vesting periods based upon the probable performance target, as applicable, that will be met. For the year ended December 31, 2023, we accrued for 100% of the RSUs granted.

Nonvested RSUs at target for the year ended December 31, 2023 is summarized in the following table.

		Weighted-
		Average
		Grant-Date
Restricted Stock Units	Shares	Fair Value
Outstanding at January 1, 2023	940,512	$	73.82
Granted	398,655		74.45
Vested	(455,443)		71.65
Forfeited	(10,676)		76.15
Outstanding at December 31, 2023	873,048	$	75.22

The nonvested shares of 873,048 at December 31, 2023 includes 241,219 shares that have fully vested but have not been released. Of these shares that have not been released, 86,659 shares are subject to a two-year holding period, which commenced at the end of their respective vesting period. These vested shares will be released and issued into shares of common stock at the end of their respective two-year holding period, the last of which will end by March 31, 2025. The majority of the remaining shares of 154,560 that have fully vested but not yet released are related to the 2021 LTI performance-based RSU grants and will be released in the first quarter of 2024 with the finalization of 2023 results. If maximum performance is achieved pursuant to the 2022 and 2023 LTI performance-based RSU grants, an additional 93,576 shares in total may be issued by the Company at the end of the three-year performance periods. The Company granted 398,655, 338,500, and 301,230 shares for the year ended December 31, 2023, 2022, and 2021, respectively. The weighted-average grant-date fair value of restricted stock units granted in 2023 was $74.45. Due to the acquisition of Atlantic Capital, effective March 1, 2022, a total of 55,736 RSUs were assumed by the Company. Compensation expense of $34.0 million, $31.7 million, and $25.2 million was recorded in 2023, 2022, and 2021, respectively.

As of December 31, 2023, there was $23.2 million of total unrecognized compensation cost related to nonvested RSUs granted under the plan. This cost is expected to be recognized over a weighted-average period of 1.43 years as of December 31, 2023. The total fair value of restricted stock units that vested during the years ended December 31, 2023, 2022, and 2021 was approximately $32.6 million, $30.0 million, and $6.0 million, respectively.

Employee Stock Purchase Plan

The Company previously registered 363,825 shares of common stock in connection with the establishment of the 2002 Employee Stock Purchase Plan. At the annual shareholders meeting on October 29, 2020, a proposal was adopted to increase the shares of common stock that may be issued under the plan by up to 1,400,000 shares. The plan is available to all employees who have attained age 21 and completed six months of service. The Company currently has approximately 1.3 million shares available for issuances under the plan. The price at which common stock may be purchased for each quarterly option period is the lesser of 95% of the common stock’s fair value on either the first or last day of the quarter. Employees purchased 43,356, 38,491 and 33,013 shares in 2023, 2022 and 2021, respectively, through the Employee Stock Purchase Plan. The Company recognized $163,000, $165,000 and $126,000 in share-based compensation expense for the years ended December 31, 2023, 2022 and 2021, respectively.