Note 10 - Share-based Compensation

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

NOTE 10.  SHARE-BASED COMPENSATION

Under the 2014 Long-Term Incentive Plan (“2014 LTIP”), 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 SARs and RSUs to individual employees.

During first quarter 2023, we granted 67,637 SARs with an $8.77 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 2023, we granted 108,747 SARs with an $8.63 grant date fair value per SAR that become exercisable ratably over five years (20% per year) and expire ten years after the grant date. There were no grants during first quarter 2024. 

The fair value of our 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 SARs granted but are not considered by the model. Because our 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 SARs at the time of grant. The assumptions used to value SARs granted in 2023 are as follows:

	2023 grant with 7 year expiration			2023 grant with 5 year expiration
Risk-free interest rate		3.79	%		3.87	%
Expected dividend yield		3.00	%		3.00	%
Expected common stock volatility		40.76	%		40.76	%
Expected life (in years)		7			6.5

A summary of our SAR activity during the first three months of 2024 and 2023 is as follows:

	For the Three Months Ended March 31, 2024
				Aggregate		Remaining		Weighted-
				Intrinsic Value		Contractual		Average
	Options/SARs			(in thousands)		Term (Yrs.)		Exercise Price
Outstanding, January 1		594,561						$	22.81
Granted		—							—
Exercised		(500	)						12.01
Forfeited		—							—
Expired		—							—
Outstanding, March 31		594,061		$	2,580		5.92	$	22.82
Exercisable, March 31		347,396		$	1,909		4.37	$	21.66

	For the Three Months Ended March 31, 2023
				Aggregate		Remaining		Weighted-
				Intrinsic Value		Contractual		Average
	Options/SARs			(in thousands)		Term (Yrs.)		Exercise Price
Outstanding, January 1		473,212						$	21.36
Granted		176,384							26.37
Exercised		(1,000	)						12.01
Forfeited		—							—
Expired		—							—
Outstanding, March 31		648,596		$	740		6.86	$	22.74
Exercisable, March 31		288,517		$	740		4.47	$	20.78

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 three months of 2024 and 2023 is as follows:

	RSUs		Weighted Average Grant Date Fair Value
Nonvested, December 31, 2023		2,399	$	21.73
Granted		—		—
Forfeited		—		—
Vested		—		—
Nonvested, March 31, 2024		2,399	$	21.73

	RSUs		Weighted Average Grant Date Fair Value
Nonvested, December 31, 2022		7,204	$	20.49
Granted		—		—
Forfeited		—		—
Vested		—		—
Nonvested, March 31, 2023		7,204	$	20.49

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 three months of 2024 and 2023, total stock compensation expense for all share-based arrangements was $163,000 and $196,000 and the related deferred tax benefits were approximately $39,000 and $47,000. At March 31, 2024 our total unrecognized compensation expense related to all nonvested awards not yet recognized totaled $2.1 million and on a weighted average basis, will be recognized over the next 2.24 years.