Capital Bancorp IncCBNK
Capital Bancorp Inc Stock Compensation Disclosure
Stock-Based Compensation
There was $570 thousand and $78 thousand of total unrecognized compensation expense related to nonvested restricted stock at December 31, 2024 and 2023, respectively.
Compensation cost is recognized for stock options and restricted stock awards issued to employees. Compensation cost is measured as the fair value of these awards on their date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used as the fair value of restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period for stock option awards and as the restriction period for restricted stock awards. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.
The expense recognition of employee stock option and restricted stock awards resulted in net expense of approximately $2.1 million and $1.8 million during the years ended December 31, 2024 and 2023, respectively.
Stock options:
The Company currently has two incentive compensation plans with outstanding stock options, the 2002 Stock Option Plan and the Amended and Restated 2017 Stock and Incentive Compensation Plan (the “Plan”). Only the Plan, which authorizes the use of stock options, stock appreciation rights, restricted stock and/or restricted stock, is available to grant options and shares to employees and directors. At inception, the Plan allowed for up to 1,120,000 shares of common stock to be issued. In 2021, an additional 900,000 shares were authorized for a total of 2,020,000. As of December 31, 2024, there are 446,794 shares available for future grant. Shares of common stock related to any unexercised or unvested award granted under the Plan that terminate or expire, or are subsequently forfeited or cancelled for any reason, become available for re-grant under the Plan. Option prices are equal to or greater than the estimated fair value of the common stock at the date of grant. Options outstanding vest over a four-year period, whereby 25% of the options become exercisable on each anniversary of the grant date.
Information with respect to options outstanding during the years ended December 31, 2024 and 2023 is as follows:
| 2024 | 2023 | |||||||||||||||||||||||||
| Shares | Weighted Average Exercise Price | Shares | Weighted Average Exercise Price | |||||||||||||||||||||||
| Outstanding at beginning of year | 550,718 | $ | 19.21 | 811,160 | $ | 15.37 | ||||||||||||||||||||
| Add: Granted | 358,847 | 20.97 | 168,819 | 23.34 | ||||||||||||||||||||||
| Less: Exercised | (150,247) | 14.97 | (228,405) | 11.96 | ||||||||||||||||||||||
| Less: Retired on exercise | (89,352) | 14.59 | (124,939) | 12.29 | ||||||||||||||||||||||
| Less: Expired/cancelled/forfeited | (55,606) | 23.22 | (75,917) | 20.49 | ||||||||||||||||||||||
| Outstanding at end of year | 614,360 | $ | 21.02 | 550,718 | $ | 19.21 | ||||||||||||||||||||
| Exercisable at end of year | 287,136 | $ | 18.52 | 295,450 | $ | 16.69 | ||||||||||||||||||||
The weighted average fair value of options granted during the years ended December 31, 2024 and 2023, was $8.70 and $10.81, respectively.
Note 15 - Stock-Based Compensation (continued)
A summary of information about stock options outstanding is as follows:
| Exercise Price Range | Weighted Average Exercise Price | Average Remaining Life (years) | Outstanding Shares | Exercisable Shares | ||||||||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||
$8.77 - 13.18 | $ | 8.77 | 0.39 | 4,036 | 4,036 | |||||||||||||||||||||||||||
13.19 - 17.59 | 14.21 | 0.63 | 180,744 | 161,658 | ||||||||||||||||||||||||||||
17.60 - 22.00 | 18.85 | 3.31 | 42,883 | 14,415 | ||||||||||||||||||||||||||||
22.01 - 26.41 | 24.57 | 3.16 | 386,697 | 107,027 | ||||||||||||||||||||||||||||
| Total outstanding options | $ | 21.02 | 2.41 | 614,360 | 287,136 | |||||||||||||||||||||||||||
| Intrinsic value on December 31, 2024 | $ | 2,390,720 | $ | 2,131,880 | ||||||||||||||||||||||||||||
| December 31, 2023 | ||||||||||||||||||||||||||||||||
$10.70 - 14.63 | $ | 14.18 | 1.52 | 267,527 | 221,460 | |||||||||||||||||||||||||||
14.64 - 18.56 | 15.27 | 1.57 | 24,000 | 15,000 | ||||||||||||||||||||||||||||
18.57 - 22.49 | 20.15 | 3.98 | 3,250 | 1,250 | ||||||||||||||||||||||||||||
22.50 - 26.41 | 24.82 | 3.56 | 255,941 | 57,740 | ||||||||||||||||||||||||||||
| Total outstanding options | $ | 19.21 | 2.48 | 550,718 | 295,450 | |||||||||||||||||||||||||||
| Intrinsic value on December 31, 2023 | $ | 2,999,807 | $ | 2,346,106 | ||||||||||||||||||||||||||||
The aggregate intrinsic value as presented in the preceding tables is the difference between the estimated fair value of the stock as of December 31, 2024 and 2023, and the exercise price of the option multiplied by the number of options outstanding. Stock options with exercise prices greater than the estimated fair value of the stock are not included in this calculation.
Total unrecognized compensation expense related to stock options to be recognized over the next five years was $1.6 million and $1.4 million at December 31, 2024 and 2023, respectively.
The intrinsic value of stock options exercised was $1.8 million and $1.9 million during the years ended December 31, 2024 and 2023, respectively.
The weighted average fair value of options granted during 2024 and 2023 were estimated using the Black-Scholes option-pricing model with the following weighted average assumptions:
| 2024 | 2023 | |||||||||||||
| Dividend yield | 1.33% | 1.04% | ||||||||||||
| Risk free interest rate | 4.02% | 4.52% | ||||||||||||
| Expected volatility | 50.80% | 54.64% | ||||||||||||
| Expected life in years | 5 | 5 | ||||||||||||
Note 15 - Stock-Based Compensation (continued)
Restricted stock:
The Company from time-to-time also grants shares of restricted stock to key employees. These awards help align the interests of these employees with the interests of the stockholders of the Company by providing economic value directly related to increases in the value of the Company’s stock. These awards typically hold service requirements over various vesting periods. The value of the stock awarded is established as the fair market value of the stock at the time of the grant. The Company recognizes expense, equal to the total value of such awards, ratably over the vesting period of the stock grants.
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. All restricted shares will fully vest in the event of change in control of the Company.
Nonvested restricted stock for the years ended December 31, 2024 and 2023 is summarized in the following table.
| 2024 | 2023 | |||||||||||||||||||||||||
| Shares | Weighted Average Grant-Date Fair Value | Shares | Weighted Average Grant-Date Fair Value | |||||||||||||||||||||||
| Nonvested at beginning of year | 28,176 | $ | 21.66 | 39,669 | $ | 17.45 | ||||||||||||||||||||
| Add: Granted | 37,311 | 23.94 | 10,714 | 25.77 | ||||||||||||||||||||||
| Less: Vested | (11,829) | 18.32 | (13,652) | 15.92 | ||||||||||||||||||||||
| Less: Retired on vesting | (5,375) | 18.12 | (8,555) | 16.46 | ||||||||||||||||||||||
| Less: Forfeited | (1,333) | 17.90 | — | — | ||||||||||||||||||||||
| Nonvested at end of year | 46,950 | $ | 24.83 | 28,176 | $ | 21.66 | ||||||||||||||||||||
The vesting schedule of restricted shares as of December 31, 2024 is as follows:
| Year | Shares | |||||||
| 2025 | 34,574 | |||||||
| 2026 | 7,639 | |||||||
| 2027 | 4,737 | |||||||
| 46,950 | ||||||||
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2024 | Mar 17, 2025 | Showing above |
| 2018 | Apr 1, 2019 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.