SOUTH PLAINS FINANCIAL, INC.SPFI
SOUTH PLAINS FINANCIAL, INC. Stock Compensation Disclosure
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12.
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STOCK-BASED COMPENSATION
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Equity Incentive Plan
The 2019 Equity Incentive Plan (“Plan”) was approved by the Company’s Board of Directors on January 16, 2019 and by its shareholders on March 6,
2019. The purpose of the Plan is to: (i) attract and retain the best available personnel for positions of substantial responsibility, (ii) provide additional incentive to employees, directors and consultants, and (iii) promote the success of the
Company’s business. This Plan permits the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, performance shares, and other stock-based awards. The
maximum aggregate number of shares of common stock that may be issued pursuant to all awards under the Plan was 4,919,509 at December
31, 2024. The maximum aggregate number of shares that may be issued under the Plan may be increased annually by up to 3% of the total
issued and outstanding common shares of the Company at the beginning of each fiscal year.
The fair value of each option award is estimated on the date of grant using the Black-Scholes model that uses the assumptions noted in the table
below. Expected volatilities are based on historical volatilities of the Company’s common stock and similar peer company averages. The Company uses historical data to estimate option exercise and post-vesting termination behavior. The expected
term of options granted represents the period of time that options granted are expected to be outstanding, which takes in to account that the options are not transferable. The risk-free interest rate for the expected term of the option is based
on the U.S. Treasury yield curve in effect at the time of the grant.
Options
A summary of activity in the Plan during the year indicated is presented in the table below (dollars in thousands, except per share data):
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Number
of Shares
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Weighted-Average
Exercise Price
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Weighted-Average
Remaining Contractual
Life in Years
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Aggregate
Intrinsic Value
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|||||||||||||
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Year Ended December 31, 2024
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||||||||||||||||
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Outstanding at beginning of year:
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1,280,858
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$
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16.91
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$
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22,849
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|||||||||||
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Granted
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32,465
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29.32
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176
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|||||||||||||
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Exercised
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(137,536
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)
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11.97
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(3,133
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)
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|||||||||||
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Forfeited
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—
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—
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—
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|||||||||||||
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Expired
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—
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—
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—
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|||||||||||||
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Balance at end of year
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1,175,787
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$
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17.83
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4.54
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$
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19,892
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||||||||||
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Exercisable at end of period
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1,064,695
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$
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17.01
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4.22
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$
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18,886
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||||||||||
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Vested at end of period
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1,064,695
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$
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17.01
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4.22
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$
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18,886
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||||||||||
A summary of assumptions used to calculate the fair values of the awards granted during the periods noted is presented below:
| Year Ended December
31, |
||||||||||||
| 2024 |
2023 | 2022 |
||||||||||
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Expected volatility
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40.45% |
39.13% to 39.68%
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40.20% to 40.29% | ||||||||
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Expected dividend yield
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1.80% |
1.74% to 1.90%
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1.30%
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|||||||
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Expected term (years)
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6.1
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6.1 to 6.3 | 6.1 to 6.3 | |||||||||
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Risk-free interest rate
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3.94% |
3.91% to 3.98%
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1.56% to 1.95% | |
|||||||
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Weighted average grant date fair value
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$ | 11.10 | $ |
10.26
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$ |
10.54
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The total intrinsic value of options exercised during the years ended December 31, 2024, 2023, and 2022 was $3.3 million, $1.8 million, and $3.9 million,
respectively.
Restricted Stock Awards and Units
A summary of activity in the Plan during the year indicated is presented in the table below:
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Number
of Shares
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Weighted-Average
Grant Date
Fair Value
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|||||||
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Year Ended December 31, 2024
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||||||||
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Outstanding at beginning of year:
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125,917
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$
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26.58
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|||||
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Granted
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89,103
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26.56
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||||||
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Exercised
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(23,478
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)
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27.38
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|||||
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Forfeited
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(3,647
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)
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24.54
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|||||
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Balance at end of year
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187,895
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$
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26.51
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|||||
Restricted stock units granted under the Plan typically vest from to four years, but vesting periods may vary. Compensation expense for
these grants will be recognized over the vesting period of the awards based on the fair value of the stock at the issue date. The total fair value of restricted stock units vested during the years ended December 31, 2024, 2023, and 2022 was $643 thousand, $931 thousand, and $601 thousand, respectively.
For the years ended December 31, 2024, 2023, and 2022 the Company recorded stock-based compensation expense
related to the Plan of $2.3 million, $2.2
million and $2.8 million, respectively. The total unrecognized compensation cost for the awards outstanding under the Plan at
December 31, 2024 was $3.2 million and will be recognized over a weighted average remaining period of 1.65 years.
Employee Stock Purchase Plan – The Company maintains the South Plains Financial, Inc. 2023 Employee Stock Purchase Plan (the “ESPP”) offering eligible
employees an opportunity to purchase shares of Company common stock at a 15% discount from the lesser of fair market value on the
first or last day of each six-month offering period, beginning August 1, 2024. The ESPP provides for the purchase of up to an aggregate of one
million shares of the Company’s common stock by the employees. A maximum of 1,200 shares per employee may be purchased per offering
period. The ESPP benefit is treated as compensation to the employee, and the compensation expense will be recognized over the service period based on the grant date fair value of the rights determined at the beginning of the purchase period,
adjusted for forfeitures and certain modifications. Stock-based compensation expense related to the ESPP was $53 thousand for the
year ended December 31, 2024. At December 31, 2024, there was $11 thousand of total unrecognized compensation expense related to
estimated ESPP shares. These costs are expected to be recognized over a period of one month. As of December 31, 2024, no shares were issued under the ESPP Plan.
A summary of assumptions used to calculate the grant date fair value of the ESPP rights for the period indicated during is presented below:
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Year Ended
December 31, 2024
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Expected volatility
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31.31
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%
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Expected dividend yield
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1.89
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%
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Expected term (years)
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0.5
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Risk-free interest rate
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5.02
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%
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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.