Investar Holding Corp Stock Compensation Disclosure
NOTE 14. STOCK-BASED COMPENSATION
Equity Incentive Plan. The Company’s Amended and Restated 2017 Long-Term Incentive Compensation Plan (the “Plan”) authorizes the grant of various types of equity awards, such as restricted stock, RSUs, stock options and stock appreciation rights to eligible participants, which include all of the Company’s employees, non-employee directors, and consultants. The Plan has reserved a total of 1,200,000 shares of common stock, 600,000 of which were authorized in 2021, for issuance to eligible participants pursuant to equity awards under the Plan. The Plan is administered by the Compensation Committee of the Board, which has the authority to designate participants in the Plan, grant awards and determine the terms and conditions thereof. The Compensation Committee, in its discretion, may delegate its authority and duties under the Plan to specified officers; however, only the Compensation Committee may approve the terms of equity awards to the Company’s executive officers and directors. At December 31, 2024, approximately 335,057 shares remain available for grant.
Stock Options
During the years ended December 31, 2024, 2023 and 2022, the Company granted 29,997, 34,497, and 34,379 stock options, respectively, to key personnel that vest in -fifth increments on each of the first five anniversaries of the grant date.
The table below summarizes the Company’s stock option activity for the periods indicated.
| Shares | Weighted Average Price | Weighted Average Remaining Contractual Term (Years) | ||||||||||
| Outstanding at December 31, 2021 | 368,481 | $ | 18.10 | 5.05 | ||||||||
| Granted | 34,379 | 18.92 | ||||||||||
| Forfeited | (42,930 | ) | 21.36 | |||||||||
| Exercised | (9,500 | ) | 14.00 | |||||||||
| Outstanding at December 31, 2022 | 350,430 | 17.89 | 4.19 | |||||||||
| Granted | 34,497 | 13.96 | ||||||||||
| Forfeited | (50,822 | ) | 19.47 | |||||||||
| Exercised | (7,500 | ) | 14.00 | |||||||||
| Outstanding at December 31, 2023 | 326,605 | 17.32 | 3.84 | |||||||||
| Granted | 29,997 | 16.35 | ||||||||||
| Exercised | (96,000 | ) | 14.16 | |||||||||
| Outstanding at December 31, 2024 | 260,602 | 18.37 | 4.78 | |||||||||
| Exercisable at December 31, 2024 | 174,872 | $ | 19.15 | 3.19 | ||||||||
The aggregate intrinsic value of stock options is calculated as the aggregate difference between the exercise price of the stock options and the fair market value of the Company’s common stock for those stock options having an exercise price lower than the fair market value of the Company’s common stock. At December 31, 2024, the shares underlying outstanding and exercisable stock options had intrinsic values of $1.0 million and $0.6 million, respectively.
The Company uses a Black-Scholes option pricing model to estimate the fair value of stock options. The Black-Scholes option pricing model incorporates various subjective assumptions, including expected term and expected volatility. Expected volatility was determined based on the historical volatilities of the Company’s stock price. Stock option expense of $0.2 million is included in “Salaries and employee benefits” in the accompanying consolidated statements of income for each of the years ended December 31, 2024, 2023 and 2022. At December 31, 2024, there was $0.4 million of unrecognized compensation cost related to stock options that is expected to be recognized over a weighted average period of 3.2 years.
The table below shows the assumptions used for the stock options granted during the years ended December 31, 2024 and 2023.
| 2024 | 2023 | |||||||
| Dividend yield | % | 2.72 | % | |||||
| Expected volatility | % | 38.31 | % | |||||
| Risk-free interest rate | % | 3.56 | % | |||||
| Expected term (in years) | 6.5 | |||||||
| Weighted average grant date fair value | $ | $ | 4.58 | |||||
Restricted Stock Units
The Company grants time-vested RSUs to its non-employee directors and certain officers, with vesting terms ranging from years to years. RSUs represent the right to receive shares of the Company’s common stock in the future upon vesting of the award. RSUs do not have voting rights and do not receive dividends or dividend equivalents. Compensation expense for RSUs is determined based on the market price of the Company’s common stock at the grant date and is applied to the total number of units granted and is recognized on a straight-line basis over the requisite service period of generally years for employees and years for non-employee directors. Upon vesting of RSUs, the benefit of tax deductions in excess of recognized compensation expense is reflected as an income tax benefit in the consolidated statements of income.
The Company granted a total of 111,792 RSUs to employees and directors for the year ended December 31, 2024. Of the RSUs granted in 2024, 90,574 shares vest over years and 21,218 shares vest over years.
The Company granted a total of 172,736 RSUs to employees and directors for the year ended December 31, 2023. Of the RSUs granted in 2023, 153,467 shares vest over years and 19,269 shares vest over years.
The Company granted a total of 134,524 RSUs to employees and directors for the year ended December 31, 2022. Of the RSUs granted in 2022, 114,554 shares vest over years and 19,970 shares vest over years.
Compensation expense related to restricted stock and RSUs included in the accompanying consolidated statements of income for the years ended December 31, 2024, 2023 and 2022 was $1.8 million, $1.8 million and $2.0 million, respectively. The unearned compensation related to these awards is amortized to compensation expense over the vesting period. As of December 31, 2024, unearned stock-based compensation cost associated with these awards totaled approximately $3.9 million and is expected to be recognized over a weighted average period of 3.1 years.
The following table summarizes the restricted stock and RSU activity for the years ended December 31, 2024 and December 31, 2023.
| December 31, | ||||||||||||||||
| 2024 | 2023 | |||||||||||||||
| Shares | Weighted Average Grant Date Fair Value | Shares | Weighted Average Grant Date Fair Value | |||||||||||||
| Balance, beginning of period | 336,749 | $ | 17.37 | 253,488 | $ | 20.19 | ||||||||||
| Granted | 111,792 | 16.41 | 172,736 | 14.82 | ||||||||||||
| Forfeited | (26,788 | ) | 17.05 | (7,008 | ) | 20.53 | ||||||||||
| Earned and issued | (97,933 | ) | 18.76 | (82,467 | ) | 20.42 | ||||||||||
| Balance, end of period | 323,820 | $ | 16.65 | 336,749 | $ | 17.37 | ||||||||||
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.