Note 18 - Stock-based Compensation

12 Months Ended

Dec. 31, 2024

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

(18) Stock-Based Compensation

The fair value of all stock-based awards granted, net of estimated forfeitures, is recognized as compensation expense over the respective service period.

At Bancorp's 2015 Annual Meeting of Shareholders, shareholders approved the 2015 Omnibus Equity Compensation Plan and authorized the shares available from the expiring 2005 plan for future awards under the 2015 plan. In 2018, shareholders approved an additional 500,000 shares for issuance under the plan. Shareholders approved an additional 1 million shares for issuance under the plan at Bancorp’s 2024 Annual Meeting of Shareholders on April 25, 2024. As of December 31, 2024, there were 1 million shares available for future awards. The 2015 Stock Incentive Plan has no defined expiration date.

SAR Grants – SARs granted have a vesting schedule of 20% per year and expire ten years after the grant date unless forfeited due to termination of employment.

Fair values of SARs are estimated at the date of grant using the Black-Scholes option pricing model, a leading formula for calculating such value. The model requires the input of assumptions, changes to which can materially affect the fair value estimate. The following assumptions were used in SAR valuations at the grant date in each year:

	2024			2023			2022
Dividend yield		2.29	%		2.24	%		2.38	%
Expected volatility		28.43	%		27.20	%		25.43	%
Risk free interest rate		4.16	%		3.84	%		1.98	%
Expected life (in years)	7.1			7.1			7.1

Dividend yield and expected volatility are based on historical information for Bancorp corresponding to the expected life of SARs granted. Expected volatility is the volatility of underlying shares for the expected term calculated on a monthly basis. The risk free interest rate is the implied yield currently available on U.S. Treasury issues with a remaining term equal to the expected life of the awards. The expected life of SARs is based on historic experience of past like-term SARs. Bancorp evaluates historical exercise and post-vesting termination behavior when determining the expected life.

RSA Grants – RSAs granted to officers vest over five years. For all grants prior to 2015, grantees are entitled to dividend payments during the vesting period. The fair value of RSAs is equal to the market value of the shares on the date of grant.

PSU Grants – PSUs vest based upon service and a three-year performance period, which begins January 1 of the first year of the performance period. Because grantees are not entitled to dividend payments during the performance period, the fair value of these PSUs is estimated based upon the market value of the underlying shares on the date of grant, adjusted for non-payment of dividends. PSUs require a one year post-vesting holding period and the fair value of such grants incorporates a liquidity discount related to the holding period of 5.8%, 5.2% and 5.8% for 2024, 2023 and 2022, respectively.

RSU Grants – RSUs are only granted to non-employee directors, are time-based and vest 12 months after grant date. Because grantees are entitled to deferred dividend payments at the end of the vesting period, the fair value of the RSUs equals market value of underlying shares on the date of grant.

In the first quarters of 2024 and 2023, Bancorp awarded 9,550 and 8,668 RSUs to non-employee directors of Bancorp with a grant date fair value of $500,000 and $550,000, respectively.

Bancorp utilized cash of $203,000 and $175,000 during 2024 and 2023, respectively, for the purchase of shares upon the vesting of RSUs.

Bancorp has recognized stock-based compensation expense for SARs, RSAs, and PSUs within compensation expense, and RSUs for directors within other non-interest expense, as follows:

	Year Ended December 31, 2024
(in thousands)	Stock Appreciation Rights			Restricted Stock Awards			Restricted Stock Units			Performance Stock Units			Total
Expense	$	284		$	1,699		$	501		$	1,289		$	3,773
Deferred tax benefit		(60	)		(357	)		(105	)		(271	)		(793	)
Total net expense	$	224		$	1,342		$	396		$	1,018		$	2,980

	Year Ended December 31, 2023
(in thousands)	Stock Appreciation Rights			Restricted Stock Awards			Restricted Stock Units			Performance Stock Units			Total
Expense	$	492		$	1,599		$	519		$	1,854		$	4,464
Deferred tax benefit		(104	)		(336	)		(109	)		(390	)		(939	)
Total net expense	$	388		$	1,263		$	410		$	1,464		$	3,525

	Year Ended December 31, 2022
(in thousands)	Stock Appreciation Rights			Restricted Stock Awards			Restricted Stock Units			Performance Stock Units			Total
Expense	$	376		$	1,373		$	332		$	2,313		$	4,394
Deferred tax benefit		(79	)		(289	)		(70	)		(486	)		(924	)
Total net expense	$	297		$	1,084		$	262		$	1,827		$	3,470

Detail of unrecognized stock-based compensation expense to be recognized in the future follows:

(in thousands) Year Ended	Stock Appreciation Rights		Restricted Stock Awards		Restricted Stock Units		Performance Stock Units		Total
2025	$	336	$	1,478	$	1	$	937	$	2,752
2026		286		1,204		—		937		2,427
2027		216		885		—		—		1,101
2028		126		468		—		—		594
2029		11		70		—		—		81
Total estimated expense	$	975	$	4,105	$	1	$	1,874	$	6,955

The following table summarizes SARs activity and related information:

													Weighted
							Weighted				Weighted		average
							average		Aggregate		average		remaining
				Exercise			exercise		intrinsic		fair		contractual
(in thousands, except per share and years)	SARs			price			price		value(1)		value		life (in years)
Outstanding, January 1, 2022		515		$15.24	-	$50.71	$	31.16	$	16,854	$	5.08		5.1
Granted		34		47.17	-	74.92		55.45		-		12.07
Exercised		(114	)	15.24	-	40.00		21.55		5,258		3.63
Forfeited		—		—				—		—		—
Outstanding, December 31, 2022		435		$19.37	-	$74.92	$	35.60	$	12,784	$	6.02		5.1
Outstanding, January 1, 2023		435		$19.37	-	$74.92	$	35.60	$	12,784	$	6.02		5.1
Granted		29		60.76	-	60.76		60.76		—		16.81
Exercised		(24	)	19.37	-	19.37		19.37		681		3.58
Forfeited		—		—				—		—		—
Outstanding, December 31, 2023		440		$19.44	-	$74.92	$	38.11	$	6,297	$	6.86		4.7
Outstanding, January 1, 2024		440		$19.44	-	$74.92	$	38.11	$	6,297	$	6.86		4.7
Granted		42		47.95	-	54.92		49.20		—		13.75
Exercised		(142	)	22.96	-	40.00		28.74		5,617		4.51
Forfeited		—		—				—		—		—
Outstanding, December 31, 2024		340		$25.76	-	$74.92	$	43.41	$	9,774	$	8.69		5.3
Vested and exercisable		240		$25.76	-	$74.92	$	39.86	$	7,610	$	6.89		4.2
Unvested		100		37.30	-	74.92		51.92		2,164		13.00		3.3
Outstanding, December 31, 2024		340		$25.76	-	$74.92	$	43.41	$	9,774	$	8.69		5.3
Vested in the current year		46		$36.65	-	$60.76	$	47.01	$	1,139	$	9.66

(1) - Aggregate intrinsic value for SARs is defined as the amount by which the current market price of the underlying stock exceeds the exercise or grant price.

SARs outstanding and exercisable by expiration year and weighted average exercise price follows:

(in thousands, except per share data)
Expiration Year	SARs outstanding		SARs vested and exercisable		Weighted average exercise price
2025		-		-	$	-
2026		20		20		25.76
2027		23		23		40.00
2028		68		68		38.10
2029		47		47		37.06
2030		46		38		37.30
2031		31		20		50.50
2032		34		16		55.45
2033		29		8		60.76
2034		42		—		49.20
		340		240	$	43.41

The following table summarizes activity for RSAs:

				Weighted
				average cost
(in thousands, except per share data)	RSAs			at grant date
Unvested at January 1, 2022		99		$	41.07
Shares awarded		35			58.47
Restrictions lapsed and shares vested		(32	)		40.39
Shares canceled		(6	)		47.49
Unvested at December 31, 2022		96		$	47.26
Unvested at January 1, 2023		96		$	47.26
Shares awarded		38			63.04
Restrictions lapsed and shares vested		(33	)		43.77
Shares canceled		(3	)		53.38
Unvested at December 31, 2023		98		$	54.23
Unvested at January 1, 2024		98		$	54.23
Shares awarded		46			52.06
Restrictions lapsed and shares vested		(33	)		49.49
Shares canceled		(9	)		53.10
Unvested at December 31, 2024		102		$	54.92

Shares currently expected to be awarded for PSUs granted to executive officers of Bancorp, the three-year performance period, which began January 1 of the award year, are as follows:

Grant Year	Vesting Period in Years		Fair Value		Shares Expected to be Awarded
2022		3	$	48.48		10,385
2023		3		54.33		18,762
2024		3		41.84		86,136

All Bancorp equity compensation plans have been approved by shareholders. The following table provides detail of the number of shares to be issued upon exercise of outstanding stock-based awards and remaining shares available for future issuance under Bancorp’s equity compensation plan as of December 31, 2024:

	Number of				Shares
	shares to be		Weighted		available for
	issued upon		average		future
Plan category (in thousands)	exercising/vesting		exercise price		issuance (a)
Equity compensation plans approved by security holders:
Stock Appreciation Rights	(b)		(b)			1,037
Restricted Stock Awards		102		N/A	(a)
Restricted Stock Units		10		N/A	(a)
Performance Stock Units	(c)			N/A	(a)
Total shares		112				1,037

(a) Under the 2015 Omnibus Equity Compensation Plan, shares of stock are authorized for issuance as incentive and non-qualified stock options, SARs, RSAs, and RSUs.

(b) At December 31, 2024, approximately 340,000 SARs were outstanding at a weighted average grant price of $43.41. The number of shares to be issued upon exercise will be determined based on the difference between the grant price and the market price at the date of exercise.

(c) The number of shares to be issued is dependent upon Bancorp achieving certain predefined performance targets and ranges from zero shares to approximately 205,000 shares. As of December 31, 2024, shares expected to be awarded totaled approximately 115,000.