Share-Based Compensation

12 Months Ended

Dec. 31, 2023

Share-Based Compensation [Abstract]

Share-Based Compensation

18. Share-Based Compensation

The NI Holdings, Inc. 2020 Stock and Incentive Plan (the “Plan”) is designed to promote the interests of the Company and its shareholders by aiding the Company in attracting and retaining employees, officers, consultants, independent contractors, advisors, and non-employee directors capable of assuring the future success of the Company, to offer such persons incentives to put forth maximum efforts for the success of the Company’s business and to afford such persons an opportunity to acquire an ownership interest in the Company, thereby aligning the interests of such persons with the Company’s shareholders.

The Plan provides for the grant of nonqualified stock options, incentive stock options, restricted stock units (“RSUs”), stock appreciation rights, dividend equivalents, and performance share units (“PSUs”) to employees, officers, consultants, advisors, non-employee directors, and independent contractors designated by the Compensation Committee of the Board of Directors (the “Compensation Committee”). Awards made under the Plan are based upon, among other things, a participant’s level of responsibility and performance within the Company.

The total aggregate number of shares of common stock that may be issued under the Plan shall not exceed 1,000,000 shares, subject to adjustments as provided in the Plan. No eligible participant may be granted any awards for more than 100,000 shares in the aggregate in any calendar year, subject to adjustment in accordance with the Plan. The aggregate amount payable pursuant to all performance awards denominated in cash to any eligible person in any calendar year is limited to $1,000 in value. Directors who are not also employees of the Company may not be granted awards denominated in shares that exceed $150 in any calendar year.

Restricted Stock Units

The Compensation Committee has awarded RSUs to non-employee directors and select executives. RSUs are promises to issue actual shares of common stock at the end of a vesting period. The RSUs granted to executives under the Plan were based on salary and vest 20% per year over a five-year period, while RSUs granted to non-employee directors vest 100% on the date of the next annual meeting of shareholders following the grant date. Dividend equivalents on RSUs are accrued during the vesting period and paid in cash at the end of the vesting period but are subject to forfeiture until the underlying shares become vested. Participants do not have voting rights with respect to RSUs.

The Company recognizes stock-based compensation costs for RSUs based on the grant date fair value. The compensation costs are normally expensed over the vesting periods to each vesting date; however, the cost of RSUs granted to executives are expensed immediately if the executive has met certain retirement criteria and the RSUs become non-forfeitable. Estimated forfeitures are included in the determination of compensation costs. No forfeitures are currently estimated.

A summary of the Company’s outstanding and unearned RSUs is presented below:

	RSUs			Weighted-Average Grant-Date Fair Value Per Share
Units outstanding and unearned at January 1, 2021		115,780		$	15.27
RSUs granted during 2021		58,700			18.76
RSUs earned during 2021		(66,100	)		15.77
Units outstanding and unearned at December 31, 2021		108,380			16.86
RSUs granted during 2022		59,600			17.61
RSUs earned during 2022		(52,620	)		17.39
Units outstanding and unearned at December 31, 2022		115,360			17.00
RSUs granted during 2023		85,000			13.76
RSUs earned during 2023		(53,780	)		16.32
Units outstanding and unearned at December 31, 2023		146,580		$	15.37

The following table shows the impact of RSU activity to the Company’s financial results:

	Year Ended December 31,
	2023			2022			2021
RSU compensation expense	$	1,095		$	952		$	1,065
Income tax benefit		(249	)		(216	)		(242	)
RSU compensation expense, net of income taxes	$	846		$	736		$	823
Total grant-date fair value of vested RSUs at end of period	$	872		$	915		$	1,042

At December 31, 2023, there was $891 of unrecognized compensation cost related to outstanding RSUs. That cost is expected to be recognized over a weighted-average period of 1.63 years.

Performance Share Units

The Compensation Committee has awarded PSUs to select executives. PSUs are promises to issue actual shares of common stock at the end of a vesting period, if certain performance conditions are met. The PSUs granted to employees under the Plan were based on salary and include a three-year adjusted book value cumulative growth target with threshold and stretch goals. They will vest on the third anniversary of the grant date, subject to the participant’s continuous employment through the vesting date and the level of performance achieved. Dividend equivalents on PSUs are accrued and paid in cash at the end of the performance period in accordance with the level of performance achieved but are subject to forfeiture until the underlying shares become vested. Participants do not have voting rights with respect to PSUs.

The Company recognizes stock-based compensation costs for PSUs based on the grant date fair value over the performance period of the awards. Estimated forfeitures are included in the determination of compensation costs. The current cost estimates represent the Company’s forecasted performance against cumulative growth targets.

A summary of the Company’s outstanding PSUs is presented below:

	PSUs			Weighted-Average Grant-Date Fair Value Per Share
Units outstanding at January 1, 2021		174,600		$	15.15
PSUs granted during 2021 (at target)		64,600			18.64
PSUs earned during 2021		(70,363	)		16.25
Performance adjustment (1)		24,300			16.25
Forfeitures		(2,537	)		16.25
Units outstanding at December 31, 2021		190,600			16.06
PSUs granted during 2022 (at target)		61,800			18.10
PSUs earned during 2022		(86,684	)		15.21
Performance adjustment (1)		31,200			15.21
Forfeitures		(6,916	)		15.21
Units outstanding at December 31, 2022		190,000			17.00
PSUs granted during 2023 (at target)		87,400			13.85
PSUs earned during 2023		—			—
Performance adjustment (1)		(63,600	)		14.26
Forfeitures		—			—
Units outstanding at December 31, 2023		213,800		$	16.53

⁽¹⁾  Represents the change in PSUs issued based upon the attainment of performance goals established by the Company.

The following table shows the impact of PSU activity to the Company’s financial results:

	Year Ended December 31,
	2023			2022			2021
PSU compensation expense (benefit)	$	206		$	(1,022	)	$	1,344
Income tax expense (benefit)		(47	)		232			(305	)
PSU compensation expense (benefit), net of income taxes	$	159		$	(790	)	$	1,039
Total grant-date fair value of vested PSUs at end of period	$	—		$	1,319		$	1,143

The cost estimates for PSU grants represent initial target awards until we can reasonably forecast the financial performance of each PSU award grant. As of December 31, 2023, the previously recognized compensation expense related to the PSU awards granted during 2022 was eliminated due to the Company's expectation that the threshold performance goal will not be met. The compensation expense related to the PSU awards granted during 2021 was previously eliminated. The actual number of shares to be issued at the end of each performance period will range from 0% to 150% of the initial target awards.

At December 31, 2023, there was $828 of unrecognized compensation cost related to outstanding PSUs. That cost is expected to be recognized over a weighted-average period of 2.16 years.