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STOCK-BASED COMPENSATION

6 Months Ended

Jun. 30, 2022

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

NOTE 13 – STOCK-BASED COMPENSATION

On April 29, 2008, the Corporation’s stockholders approved the First Bancorp. 2008 Omnibus Incentive Plan (the “Omnibus Plan”). An amended and restated Omnibus Plan was subsequently approved by the Corporation’s stockholders on May 24, 2016 to, among other things, increase the number of shares of common stock reserved for issuance under the Omnibus Plan, extend the term of the Omnibus Plan to May 24, 2026 and re-approve the material terms of the performance goals under the Omnibus Plan for purposes of the then-effective Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended. The Omnibus Plan provides for equity-based and non equity-based compensation incentives (the “awards”). The Omnibus Plan authorizes the issuance of up to 14,169,807 shares of common stock, subject to adjustments for stock splits, reorganizations and other similar events. As of June 30, 2022, there were 3,851,176 authorized shares of common stock available for issuance under the Omnibus Plan. The Corporation’s Board of Directors, based on the recommendation of the Corporation’s Compensation and Benefits Committee, has the power and authority to determine those eligible to receive awards and to establish the terms and conditions of any awards, subject to various limits and vesting restrictions that apply to individual and aggregate awards.

Restricted Stock

Under the Omnibus Plan, the Corporation may grant restricted stock to plan participants, subject to forfeiture upon the occurrence of certain events until the dates specified in the participant’s award agreement. While the restricted stock is subject to forfeiture and does not contain non-forfeitable dividend rights, participants may exercise full voting rights with respect to the shares of restricted stock granted to them. The fair value of the shares of restricted stock granted was based on the market price of the Corporation’s outstanding common stock on the date of the respective grant. The shares of restricted stocks granted to employees are subject to the following vesting period: fifty percent (50%) of those shares vest on the two-year anniversary of the grant date and the remaining 50% vest on the three-year anniversary of the grant date. The shares of restricted stocks granted to directors are generally subject to vesting on the one-year anniversary of the grant date. Common shares issued during the first six months of 2022 in connection with restricted stock awards were reissued from treasury shares.

The following table summarizes the restricted stock activity in the first six months of 2022 and 2021 under the Omnibus Plan:

		Six-Month Period Ended			Six-Month Period Ended
		June 30, 2022			June 30, 2021
		Number of shares		Weighted-Average	Number of shares		Weighted-Average
		of restricted		Grant Date	of restricted		Grant Date
		stock		Fair Value	stock		Fair Value
Unvested shares outstanding at beginning of period		1,148,775	$	6.61	1,320,723	$	5.74
Granted (1)		301,440		13.15	293,621		11.26
Forfeited		(10,364)		8.82	(10,460)		6.10
Vested		(487,198)		5.72	(363,257)		7.98
Unvested shares outstanding at end of period		952,653	$	9.11	1,240,627	$	6.39

(1)	Includes for the six-month period ended June 30, 2022, 3,048 shares of restricted stock awarded to an independent director and 298,392 shares of restricted stock awarded to employees, of which 6,084 shares were granted to retirement-eligible employees and thus charged to earnings as of the grant date. Includes for the six-month period ended June 30, 2021, 3,552 shares of restricted stock awarded to an independent director and 290,069 shares of restricted stock awarded to employees, of which 19,271 shares were granted to retirement-eligible employees and thus charged to earnings as of the grant date.

For the quarter and six-month period ended June 30, 2022, the Corporation recognized $0.9 million and $1.8 million, respectively, of stock-based compensation expense related to restricted stock awards, compared to $0.8 million and $1.8 million for the same periods in 2021, respectively. As of June 30, 2022, there was $5.2 million of total unrecognized compensation cost related to unvested shares of restricted stock. The weighted average period over which the Corporation expects to recognize such cost was 1.8 years as of June 30, 2022.

Stock-based compensation accounting guidance requires the Corporation to reverse compensation expense for any awards that are forfeited due to employee or director turnover. Changes in the estimated forfeiture rate may have a significant effect on stock-based compensation, as the Corporation recognizes the effect of adjusting the rate for all expense amortization in the period in which the forfeiture estimate is changed. If the actual forfeiture rate is higher than the estimated forfeiture rate, an adjustment is made to increase the estimated forfeiture rate, which will decrease the expense recognized in the financial statements. If the actual forfeiture rate is lower than the estimated forfeiture rate, an adjustment is made to decrease the estimated forfeiture rate, which will increase the expense recognized in the financial statements.

Performance Units

Under the Omnibus Plan, the Corporation may award performance units to Omnibus Plan participants, with each unit representing the value of one share of the Corporation’s common stock. These awards, which are granted to executives, do not contain non-forfeitable rights to dividend equivalent amounts and can only be settled in shares of the Corporation’s common stock. The performance units will vest on the third anniversary of the effective date of the awards, subject to the achievement of a pre-established tangible book value per share target. All the performance units will vest if performance is at the pre-established performance target level or above. However, the participants may vest with respect to 50% of the awards to the extent that performance is below the target but not less than 80% of the pre-established performance target level (the “80% minimum threshold”), which is measured based upon the growth in the tangible book value during the performance cycle. If performance is between the 80% minimum threshold and the pre-established performance target level, the participants will vest on a proportional amount. No performance units will vest if performance is below the 80% minimum threshold. The performance units granted in the first half of 2022 are for the performance period beginning January 1, 2022 and ending on December 31, 2024.

The following table summarizes the performance units activity under the Omnibus Plan in the first six months of 2022 and 2021:

		Six-Month Period Ended	Six-Month Period Ended
(Number of units)		June 30, 2022	June 30, 2021
Performance units at beginning of year		814,899	1,006,768
Additions		166,669	160,485
Vested (1)		(189,645)	(304,408)
Performance units at end of period		791,923	862,845

(1)	Units vested during the six-month period ended June 30, 2022 are related to performance units granted in 2019 that met the pre-established target and were settled with shares of common stock reissued from treasury shares. Units vested during the six-month period ended June 30, 2021 are related to performance units granted in 2018 that met the pre-established target and were settled with new shares of common stock.

The fair values of the performance units awarded were based on the market price of the Corporation’s outstanding common stock on the respective date of the grant. For the quarter and six-month period ended June 30, 2022, the Corporation recognized $0.5 million and $0.8 million, respectively, of stock-based compensation expense related to performance units, compared to $0.5 million and $1.0 million for the same periods in 2021, respectively. As of June 30, 2022, there was $3.5 million of total unrecognized compensation cost related to unvested performance units that the Corporation expects to recognize over the next three years. The total amount of compensation expense recognized reflects management’s assessment of the probability that the pre-established performance goal will be achieved. The Corporation will recognize a cumulative adjustment to compensation expense in the then-current period to reflect any changes in the probability of achievement of the performance goals.

Shares withheld

During the first six months of 2022, the Corporation withheld 201,930 shares (first six months of 2021 – 210,572 shares) of the restricted stock and performance units that vested during such period to cover the officers’ payroll and income tax withholding liabilities; these shares are held as treasury shares. The Corporation paid in cash any fractional share of salary stock to which an officer was entitled. In the consolidated financial statements, the Corporation presents shares withheld for tax purposes as common stock repurchases.