Note 19 - Stock-based Compensation

6 Months Ended

Jun. 30, 2025

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

(19) 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 in 2024. As of June 30, 2025, there were 951,000 shares available for future awards. The 2005 Stock Incentive Plan expired in April 2015 and SARs granted under this plan expire in 2025. 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 employment termination.

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. This model requires the input of assumptions, changes to which can materially impact the fair value estimate. The following assumptions were used in SAR valuations at the grant date in each year:

Assumptions	2025			2024
Dividend yield		2.26	%		2.29	%
Expected volatility		29.29	%		28.43	%
Risk free interest rate		4.42	%		4.16	%
Expected life (in years)		7.8			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 actual 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. Dividends associated with RSA grants are deferred until shares are vested. 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. Grants require a one-year post-vesting holding period and therefore the fair value of such grants incorporates a liquidity discount related to the holding period of 5.5% and 5.8% for 2025 and 2024.

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, therefore the fair value of the RSUs equals market value of underlying shares on the date of grant.

In the first quarters of 2025 and 2024, Bancorp awarded 7,670 and 9,550 RSUs to non-employee directors of Bancorp with a grant date fair value of $539,000 and $500,000, respectively.

Bancorp utilized cash of $344,000 and $203,000 during the first six months of 2025 and 2024, 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:

	Three months ended June 30, 2025
(in thousands)	Stock Appreciation Rights			Restricted Stock Awards			Restricted Stock Units			Performance Stock Units			Total
Expense	$	112		$	489		$	135		$	385		$	1,121
Deferred tax benefit		(23	)		(102	)		(28	)		(81	)		(234	)
Total net expense	$	89		$	387		$	107		$	304		$	887

	Three months ended June 30, 2024
(in thousands)	Stock Appreciation Rights			Restricted Stock Awards			Restricted Stock Units			Performance Stock Units			Total
Expense	$	72		$	418		$	125		$	393		$	1,008
Deferred tax benefit		(16	)		(88	)		(26	)		(83	)		(213	)
Total net expense	$	56		$	330		$	99		$	310		$	795

	Six months ended June 30, 2025
(in thousands)	Stock Appreciation Rights			Restricted Stock Awards			Restricted Stock Units			Performance Stock Units			Total
Expense	$	215		$	939		$	267		$	853		$	2,274
Deferred tax benefit		(45	)		(197	)		(56	)		(180	)		(478	)
Total net expense	$	170		$	742		$	211		$	673		$	1,796

	Six months ended June 30, 2024
(in thousands)	Stock Appreciation Rights			Restricted Stock Awards			Restricted Stock Units			Performance Stock Units			Total
Expense	$	140		$	838		$	249		$	723		$	1,950
Deferred tax benefit		(30	)		(176	)		(52	)		(152	)		(410	)
Total net expense	$	110		$	662		$	197		$	571		$	1,540

Detail of unrecognized stock-based compensation expense follows:

	Stock
(in thousands)	Appreciation		Restricted		Restricted		Performance
Year ended	Rights		Stock Awards		Stock Units		Stock Units		Total
Remainder of 2025	$	226	$	991	$	272	$	463	$	1,952
2026		406		1,718		1		925		3,050
2027		336		1,406		—		925		2,667
2028		246		999		—		—		1,245
2029		131		618		—		—		749
2030		13		59		—		—		72
Total estimated future expense	$	1,358	$	5,791	$	273	$	2,313	$	9,735

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 life data)	SARs			price			price		value(1)		value		life (in years)
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
Outstanding, January 1, 2025		340		$25.76	-	$74.92	$	43.41	$	9,774	$	8.69		5.3
Granted		25		75.21	-	75.21		72.21		—		23.75
Exercised		(20	)	25.76	-	25.76		25.76		1,007		3.56
Forfeited		—		—				—		—		—
Outstanding, June 30, 2025		345		$25.76	-	$75.21	$	46.77	$	11,115	$	10.09		5.4
Vested and exercisable		252		$25.76	-	$60.76	$	42.20	$	9,284	$	7.72		4.3
Unvested		93		47.17	-	75.21		59.21		1,831		16.54		3.6
Outstanding, June 30, 2025		345		$25.76	-	$75.21	$	46.77	$	11,115	$	10.09		5.4
Vested in the current year		33		$36.65	-	$60.76	$	49.26	$	974	$	11.27

(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.

The following table summarizes activity for RSAs granted:

				Grant date
				weighted
(in thousands, except per share data)	RSAs			average cost
Unvested at January 1, 2024		98		$	54.23
Shares awarded		46			52.06
Restrictions lapsed and shares released		(33	)		49.49
Shares cancelled		(9	)		53.10
Unvested at December 31, 2024		102		$	54.92
Unvested at January 1, 2025		102		$	54.92
Shares awarded		38			76.12
Restrictions lapsed and shares released		(31	)		51.64
Shares cancelled		(3	)		61.44
Unvested at June 30, 2025		106		$	62.18

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

	Vesting				Shares
Grant	period		Fair		expected to
year	in years		value		be awarded
2023		3		54.33		18,765
2024		3		41.84		49,957
2025		3		67.61		39,940