Note 11 - Stockholders' Equity

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

11. Stockholders’ Equity

Common Stock

During the nine months ended September 30, 2022, the Company issued 114,494 shares of common stock pursuant to its long-term incentive plan (see “Long Term Incentive Plan” below) and 531,728 shares of common stock pursuant to its at-the-market offering (see “At-the-Market Offering” below).

As of September 30, 2022, the Company had 15,266,746 shares of common stock, par value $0.01 per share, issued and 14,979,759 shares of common stock, par value $0.01 per share, outstanding.

Preferred Stock

On July 24, 2020, the Company issued 2,000,000 shares of its 8.50% Series A Cumulative Redeemable Preferred Stock (the “Series A Preferred Stock”) at a price to the public of $24.00 per share, for gross proceeds of $48.0 million before deducting underwriting discounts and commissions of approximately $1.2 million and other offering expenses of approximately $0.8 million. The Series A Preferred Stock has a $25.00 per share liquidation preference.

Share Repurchase Program

On March 9, 2020, the Board authorized a share repurchase program (the “Share Repurchase Program”) through which the Company may repurchase an indeterminate number of shares of our common stock at an aggregate market value of up to $10.0 million in shares of its common stock, par value $0.01 per share, during a two-year period that expired on March 9, 2022. On September 28, 2020, the Board authorized the expansion of the Share Repurchase Program to include the Company’s Series A Preferred Stock with the same period and repurchase limit. The Company may utilize various methods to affect the repurchases, and the timing and extent of the repurchases will depend upon several factors, including market and business conditions, regulatory requirements and other corporate considerations, including whether the Company’s common stock is trading at a significant discount to net asset value ("NAV") per share. Repurchases under this program may be discontinued at any time. From inception through expiration, the Company  repurchased 327,422 shares of its common stock, par value $0.01 per share, at a total cost of approximately $4.8 million, or $14.61 per share. These repurchased shares of common stock are classified as treasury stock and reduce the number of shares of the Company’s common stock outstanding and, accordingly, are considered in the weighted-average number of shares outstanding during the period. On March 3, 2021, the Company cancelled 40,435 shares of common stock, reducing the total classified as treasury stock to 286,987.

Long Term Incentive Plan

On January 31, 2020, the NexPoint Real Estate Finance, Inc. 2020 Long Term Incentive Plan (the “2020 LTIP”) was approved, and on May 7, 2020, the Company filed a registration statement on Form S-8 registering 1,319,734 shares of common stock, par value $0.01 per share, which the Company may issue pursuant to the 2020 LTIP. The 2020 LTIP authorizes the compensation committee of the Board to provide equity-based compensation in the form of stock options, appreciation rights, restricted shares, restricted stock units, performance shares, performance units and certain other awards denominated or payable in, or otherwise based on, the Company’s common stock or factors that may influence the value of the Company’s common stock, plus cash incentive awards, for the purpose of providing the Company’s directors, officers and other key employees (and those of the Manager and the Company’s subsidiaries), the Company’s non-employee directors, and potentially certain non-employees who perform employee-type functions, incentives and rewards for performance.

Restricted Stock Units. Under the 2020 LTIP, restricted stock units may be granted to the Company’s directors, officers and other key employees (and those of the Manager and the Company’s subsidiaries) and typically vest over a three to five-year period for officers, employees and certain key employees of the Manager and annually for directors. The most recent grant of restricted stock units to officers, employees and certain key employees of the Manager will vest over a four-year period. Beginning on the date of grant, restricted stock units earn dividends that are payable in cash on the vesting date. On May 8, 2020, pursuant to the 2020 LTIP, the Company granted 14,739 restricted stock units to its directors, on June 24, 2020, the Company granted 274,274 restricted stock units to its officers and other employees of the Manager, on November 2, 2020, the Company granted 1,838 restricted stock units to the sole member of the general partner of one of the Company's subsidiaries, on February 22, 2021, the Company granted 220,352 restricted stock units to its officers and other employees of the Manager and 11,832 restricted stock units to its directors, and on February 21, 2022, the Company granted 264,476 restricted stock units to its officers and other employees of the Manager and 12,464 restricted stock units to its directors. The following table includes the number of restricted stock units granted, vested, forfeited and outstanding as of  September 30, 2022:

	2022
	Number of Units				Weighted Average Grant Date Fair Value
Outstanding January 1, 2022		439,087			$	15.97
Granted		276,940				19.85
Vested		(135,488	)	(1)		19.39
Forfeited		(2,889	)			20.81
Outstanding September 30, 2022		577,650			$	17.89

(1) Certain key employees of the Manager elected to net the taxes owed upon vesting against the shares issued resulting in 114,494 shares being issued as shown on the consolidated statements of stockholders' equity.

The following table contains information regarding the vesting of restricted stock units under the 2020 LTIP for the next five calendar years subsequent to September 30, 2022:

	Shares Vesting
	February			May			Total
2022		—	(1)		—	(1)		—
2023		133,393			68,569			201,962
2024		120,638			68,564			189,202
2025		120,644			—			120,644
2026		65,842			—			65,842
Total		440,517			137,133			577,650

(1) Shares vested prior to September 30, 2022.

At-The-Market-Offering

On March 31, 2021, the Company, the OP and the Manager entered into separate equity distribution agreements (the “2021 Equity Distribution Agreements”) with each of Raymond James & Associates, Inc. (“Raymond James”), Keefe, Bruyette & Woods, Inc., Robert W. Baird & Co. Incorporated and Virtu Americas LLC (collectively, the “2021 Sales Agents”), pursuant to which the Company could issue and sell from time to time shares of the Company's common stock and Series A Preferred Stock having an aggregate sales price of up to $100.0 million (the “2021 ATM Program”). The 2021 Equity Distribution Agreements provided for the issuance and sale of common stock or Series A Preferred Stock by the Company through a sales agent acting as a sales agent or directly to the sales agent acting as principal for its own account at a price agreed upon at the time of sale. On December 16, 2021, the Company terminated each 2021 Equity Distribution Agreement.

Sales of shares of common stock or Series A Preferred Stock under the 2021 ATM Program, if any, may have been made in transactions that are deemed to be “at the market” offerings, as defined in Rule 415 under the Securities Act including, without limitation, sales made by means of ordinary brokers' transactions on the New York Stock Exchange (“NYSE”), to or through a market maker at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices based on prevailing market prices. The Company did not incur any termination penalties as a result of the 2021 Equity Distribution Agreements. As of the termination date, no Series A Preferred Stock had been sold through the 2021 ATM Program. The following table contains summary information of the 2021 ATM Program for sales from inception through the termination date:

Gross Proceeds	$	11,264,237
Shares of Common Stock Issued		532,694
Gross Average Sale Price per Share of Common Stock	$	21.15
Sales Commissions	$	168,963
Offering Costs		793,779
Net Proceeds		10,301,495
Average Price Per Share, net	$	19.34

On March 15, 2022, the Company, the OP and the Manager entered into separate equity distribution agreements (the “2022 Equity Distribution Agreements”) with each of Raymond James, Keefe, Bruyette & Woods, Inc., Robert W. Baird & Co. Incorporated and Virtu Americas LLC (collectively, the “2022 Sales Agents”), pursuant to which the Company could issue and sell from time to time shares of the Company's common stock and Series A Preferred Stock having an aggregate sales price of up to $100.0 million (the “2022 ATM Program”). The 2022 Equity Distribution Agreements provided for the issuance and sale of common stock or Series A Preferred Stock by the Company through a sales agent acting as a sales agent or directly to the sales agent acting as principal for its own account at a price agreed upon at the time of sale. 

Sales of shares of common stock or Series A Preferred Stock under the 2022 ATM Program, if any, may be made in transactions that are deemed to be “at the market” offerings, as defined in Rule 415 under the Securities Act including, without limitation, sales made by means of ordinary brokers' transactions on the NYSE, to or through a market maker at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices based on prevailing market prices.

The following table contains summary information of the 2022 ATM Program since its inception:

Gross Proceeds	$	12,575,493
Shares of Common Stock Issued		531,728
Gross Average Sale Price per Share of Common Stock	$	23.65
Sales Commissions	$	188,655
Offering Costs		869,035
Net Proceeds		11,517,803
Average Price Per Share, net	$	21.66

Noncontrolling Interest in Subsidiary

On April 1, 2021, a subsidiary of one of the Subsidiary OPs (such subsidiary, the “REIT Sub”) closed its issuance of 125 preferred membership units of the REIT Sub (the “Preferred Membership Units”) at a price of $1,000 per unit, for gross proceeds of approximately $0.1 million, net of offering costs and initial administrative expenses. Holders of Preferred Membership Units are entitled to receive distributions semiannually from the REIT Sub at a per annum rate equal to 12.0% of the total of the purchase price of $1,000 per unit plus accumulated and unpaid distributions. The Preferred Membership Units are generally redeemable by the REIT Sub at any time for $1,000 per unit plus accumulated and unpaid distributions and an additional redemption premium if the Preferred Membership Units are redeemed on or before December 31, 2023. The issuance of the 125 Preferred Membership Units is presented as “Noncontrolling interest in subsidiary” on the Consolidated Balance Sheets and Consolidated Statements of Stockholders’ Equity.

Secondary Public Offering

On August 18, 2021, the Company, the OP and the Manager entered into an underwriting agreement (the “Underwriting Agreement”) with Raymond James as representative of the several underwriters named therein (collectively, the “Underwriters”), pursuant to which the Company agreed to sell 2,000,000 shares of its common stock (the “Firm Shares”) at a public offering price of $21.00 per share. The Company also granted the Underwriters a 30-day option to purchase up to an additional 300,000 shares of its common stock (the “Option Shares”). The Firm Shares were issued on August 20, 2021. On September 8, 2021, the Underwriters partially exercised the option to purchase 59,700 Option Shares. The 59,700 Option Shares were issued on September 10, 2021.

The following table contains summary information of the secondary public offering:

Gross Proceeds	$	43,253,700
Shares of Common Stock Issued		2,059,700
Gross Average Sale Price per Share of Common Stock	$	21.00
Underwriting Discounts	$	1,946,417
Offering Costs		813,748
Net Proceeds		40,493,535
Average Price Per Share, net	$	19.66

OP Unit Redemption

At the 2021 annual meeting of the Company, the Company's stockholders approved the potential issuance of 13,578,905.9 shares of the Company's common stock to related parties in connection with the redemption of the OP Units or SubOP Units that may be redeemed for OP Units. On September 8, 2021, the Company redeemed approximately 1,479,132 OP Units and issued 1,479,132 shares of common stock to the redeeming unitholders. On January 7, 2022, the Company redeemed approximately 4,774,572 OP Units and issued 4,774,570 shares of common stock to the redeeming unitholders. On February 14, 2022, the Company redeemed approximately 395,033 OP Units and issued 395,033 shares of common stock to the redeeming unitholders. 

Dividends

The Board declared the third quarterly dividend of 2022 to common stockholders of $0.50 per share on July 27, 2022, which was paid on September 30, 2022, to common stockholders of record as of September 15, 2022.

The Board declared a dividend to preferred stockholders of $0.53125 per share on September 21, 2022, which was paid on October 25, 2022, to preferred stockholders of record as of  October 14, 2022.