Share-Based Compensation

9 Months Ended

Sep. 30, 2024

Share-Based Compensation

Share-Based Compensation

Note 12 — Share-Based Compensation

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 restricted stock units (“RSUs”). Our 2020 plan was adopted by our shareholders at our annual meeting on October 29, 2020. The 2020 plan was subsequently amended and restated during our annual meeting on April 24, 2024 to increase the number of shares of common stock available for future grants. The Company also assumed the obligations of Atlantic Capital Bancshares, Inc. (“ACBI”) under various equity incentive plans pursuant to the acquisition of ACBI on March 1, 2022, and the obligations of 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 amended and restated 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 2,451,634 shares registered under the 2020 amended and restated plan.

Activity in the Company’s stock option plans is summarized in the following table.

				Weighted
		Weighted		Average	Aggregate
		Average		Remaining	Intrinsic
	Shares	Price		(Yrs.)	(000’s)
Outstanding at January 1, 2024	107,592	$	72.60
Exercised	(50,155)		79.62
Expired	—		—
Outstanding at September 30, 2024	57,437		66.48	2.04	$	1,763
Exercisable at September 30, 2024	57,437		66.48	2.04	$	1,763

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. There have been no stock options issued during the first nine months of 2024. Because all outstanding stock options had vested as of December 31, 2023, there was no unrecognized compensation cost related to nonvested stock option grants under the plans or fair value of shares vested during the nine months ended September 30, 2024. The intrinsic value of stock option shares exercised for the nine months ended September 30, 2024, was $724,000.

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.

Nonvested restricted stock for 2024 is summarized in the following table.

		Weighted-
		Average
		Grant-Date
Restricted Stock	Shares	Fair Value
Nonvested at January 1, 2024	16,248	$	88.63
Vested	(10,462)		90.00
Forfeited	(316)		90.00
Nonvested at September 30, 2024	5,470	$	85.92

As of September 30, 2024, there was $147,000 of total unrecognized compensation cost related to nonvested restricted stock granted under the plans. This cost is expected to be recognized over a weighted-average period of 0.31 years as of September 30, 2024. The total fair value of shares vested during the nine months ended September 30, 2024, was $942,000.

Restricted Stock Units (“RSUs”)

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. 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.

Outstanding RSUs at target for the nine months ended September 30, 2024, is summarized in the following table.

		Weighted-
		Average
		Grant-Date
Restricted Stock Units	Shares	Fair Value
Outstanding at January 1, 2024	873,048	$	75.22
Granted	372,271		80.74
Vested	(380,151)		77.34
Forfeited	(15,213)		77.10
Outstanding at September 30, 2024	849,955	$	76.65

The nonvested shares of 849,955 at September 30, 2024, includes 61,863 shares that have fully vested but 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. If maximum performance is achieved pursuant to the 2022, 2023 and 2024 Long Term Incentive performance-based RSUs grants, an additional 131,839 shares in total may be issued by the Company at the end of the three-year performance periods.

As of September 30, 2024, there was $28.7 million of total unrecognized compensation cost at target related to nonvested RSUs granted under the plan. This cost is expected to be recognized over a weighted-average period of 1.09 years as of September 30, 2024. The total fair value of RSUs vested and released during the nine months ended September 30, 2024, was $31.6 million.