Note 10 - Share-based Compensation

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

NOTE 10.  SHARE-BASED COMPENSATION

Under the 2014 Long-Term Incentive Plan (“2014 LTIP”), stock options, SARs and RSUs have generally been granted with an exercise price equal to the fair value of Summit's common stock on the grant date. We periodically grant employee stock options to individual employees.

There were no grants of SARs or stock options during the first nine months of 2022. During third quarter 2021, we granted 54,947 SARs with an $8.97 grant date fair value per SAR that become exercisable ratably over seven years (14.3% per year) and expire ten years after the grant date. Also during 2021, we granted 122,542 SARs with an $8.40 grant date fair value per SAR that become exercisable ratably over five years (20% per year) and expire ten years after the grant date.

The fair value of our employee stock options and SARs granted under the Plans is estimated at the date of grant using the Black-Scholes option-pricing model. This model requires the input of highly subjective assumptions, changes to which can materially affect the fair value estimate. Additionally, there may be other factors that would otherwise have a significant effect on the value of employee stock options and SARs granted but are not considered by the model. Because our employee stock options and SARs have characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options and SARs at the time of grant. The assumptions used to value SARs granted in 2021 are as follows:

	2021 grant with 7 year expiration			2021 grant with 5 year expiration
Risk-free interest rate		1.06	%		0.74	%
Expected dividend yield		3.00	%		3.00	%
Expected common stock volatility		55.59	%		55.59	%
Expected life (in years)		7			5.5

A summary of our SAR and stock option activity during the first nine months of 2022 and 2021 is as follows:

	For the Nine Months Ended September 30, 2022
				Aggregate		Remaining		Weighted-
				Intrinsic Value		Contractual		Average
	Options/SARs			(in thousands)		Term (Yrs.)		Exercise Price
Outstanding, January 1		491,792						$	21.32
Granted		—							—
Exercised		(14,996	)						19.46
Forfeited		—							—
Expired		—							—
Outstanding, September 30		476,796		$	2,651		6.24	$	21.38
Exercisable, September 30		262,622		$	1,724		4.86	$	20.38

	For the Nine Months Ended September 30, 2021
				Aggregate		Remaining		Weighted-
				Intrinsic Value		Contractual		Average
	Options/SARs			(in thousands)		Term (Yrs.)		Exercise Price
Outstanding, January 1		329,203						$	20.47
Granted		177,489							21.85
Exercised		(5,800	)						3.85
Forfeited		—							—
Expired		—							—
Outstanding, September 30		500,892		$	1,808		7.12	$	21.15
Exercisable, September 30		213,216		$	1,287		5.00	$	18.90

Grants of RSUs include time-based vesting conditions that generally vest ratably over a period of 3 to 5 years. A summary of our RSU activity during the first nine months of 2022 and 2021 is as follows:

	RSUs			Weighted Average Grant Date Fair Value
Nonvested, December 31, 2021		13,015		$	21.24
Granted		—			—
Forfeited		(313	)		26.63
Vested		(5,246	)		22.24
Nonvested, September 30, 2022		7,456		$	20.31

	RSUs			Weighted Average Grant Date Fair Value
Nonvested, December 31, 2020		15,686		$	20.40
Granted		—			—
Forfeited		—			—
Vested		(3,400	)		19.61
Nonvested, September 30, 2021		12,286		$	20.62

We recognize compensation expense based on the estimated number of stock awards expected to actually vest, exclusive of the awards expected to be forfeited.  During the first nine months of 2022 and 2021, total stock compensation expense for all share-based arrangements was $469,000 and $448,000 and the related deferred tax benefits were approximately $113,000 and $108,000. At September 30, 2022 our total unrecognized compensation expense related to all nonvested awards not yet recognized totaled $1.70 million and on a weighted average basis, will be recognized over the next 2.12 years.