Share-based Compensation Plans

9 Months Ended

Sep. 30, 2021

Share-based Compensation Plans

Share-based Compensation Plans

NOTE 9 - Share-based Compensation Plans

The Company adopted the FFBW, Inc. 2018 Equity Incentive Plan in 2018. In May 2021 the Company adopted the FFBW, Inc. 2021 Equity Incentive Plan. ASC Topic 718 requires that the grant date fair value of equity awards to employees and directors be recognized as compensation expense over the period during which they are required to provide service in exchange for such awards.

The following table summarizes the impact of the Company’s share-based payment plans in the financial statements for the period shown:

	Nine Months Ended
	September 30,
	2021		2020
Total cost of stock grant plan during the year	$	173	$	154
Total cost of stock option plan during the year		127		119
Total cost of share-based payment plans during the year	$	300	$	273
Amount of related income tax benefit recognized in income	$	71	$	74

Options are granted with an exercise price equal to no less than the market price of the Company’s shares at the date of grant: those option awards generally vest pro-rata over five years of service and have 10-year contractual terms. Restricted shares typically vest pro-rata over a five year period, 20% per year beginning one year from the issuance date. Under the FFBW, Inc. 2021 Equity Incentive Plan, restricted shares to Board of Director members vest in one year. In 2021, 4,000 restricted shares were granted to directors under the 2021 plan.

Share amounts related to periods prior to the date of the closing of the Offering on January 16, 2020 have been restated to give retroactive recognition to the 1.1730 exchange ratio applied in the offering.

The following table summarizes stock options activity for the nine months ended September 30, 2021:

	Outstanding
				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Stock Option	Exercise		Contractual	Intrinsic
	Awards	Price		Term (years)	Value
Options outstanding as of December 31, 2020	269,220	$	10.51
Granted	76,000		11.27
Exercised	(6,692)		10.18
Expired or cancelled	(2,346)		10.64
Forfeited	(19,057)		10.01
Options outstanding as of September 30, 2021	317,125	$	10.73	7.98	$	320,559
Options exercisable as of September 30, 2021	126,770	$	10.71	7.31	$	128,851

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model based on certain assumptions. Since the Company does not have sufficient historical fair value estimates of its stock, the Company calculates expected volatility using the historical volatility of the Dow Jones U.S. Financial Services Index. The risk-free interest rate for periods within the contractual term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. The expected life of options is estimated based on the assumption that options will be exercised evenly throughout their life after vesting and represents the period of time that options granted are expected to remain outstanding.

There were no options granted during the three months ended September 30, 2021.

The following is a summary of changes in restricted shares for the nine months ended September 30, 2021:

		Weighted
		Average
	Number of	Grant Date Fair
	Shares	Value
Nonvested stock awards as of December 31, 2020	62,060	$	10.73
Granted	22,750		11.35
Vested	(19,561)		10.77
Forfeited	(5,519)		10.08
Nonvested stock awards as of September 30, 2021	59,730	$	11.02

As of September 30, 2021, there was $1.2 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements (including share option and non-vested share awards) granted under the Company’s equity incentive plans. At September 30, 2021, the weighted-average period over which the unrecognized compensation expense is expected to be recognized was approximately 3.2 years.