Stock-Based Compensation

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement, Noncash Expense [Abstract]

Under the Peoples Bancorp Inc. Third Amended and Restated 2006 Equity Plan (the "2006 Equity Plan"), Peoples may grant, among other awards, nonqualified stock options, incentive stock options, restricted common share awards, stock appreciation rights, performance units and unrestricted common share awards to employees and non-employee directors. The total number of common shares available under the 2006 Equity Plan is 891,340. The maximum number of common shares that can be issued for incentive stock options is 500,000 common shares. Since February 2009, Peoples has granted restricted common shares to employees, and periodically to non-employee directors, subject to the terms and conditions prescribed by the 2006 Equity Plan. Additionally, in 2017, Peoples granted performance units to certain officers. In general, common shares issued in connection with stock-based awards are issued from treasury shares to the extent available. If no treasury shares are available, common shares are issued from authorized but unissued common shares.

Restricted Common Shares

Under the 2006 Equity Plan, Peoples may award restricted common shares to officers, key employees and non-employee directors. In general, the restrictions on the restricted common shares awarded to employees expire after periods ranging from one to five years. Since 2018, common shares awarded to non-employee directors have vested immediately upon grant with no restrictions. In 2019, Peoples granted an aggregate of 117,773 restricted common shares subject to performance-based vesting to officers and key employees with restrictions that will lapse three years after the grant date; provided that in order for the restricted common shares to vest in full, Peoples must have reported positive net income and maintained a well-capitalized status by regulatory standards for each of the three fiscal years preceding the vesting date. During 2019, Peoples granted, to certain key employees, an aggregate of 16,153 restricted common shares subject to time-based vesting, the majority of which will vest three years after the grant date.

The following summarizes the changes to Peoples’ outstanding restricted common shares for the year ended December 31, 2019:


	Time-Based Vesting				Performance-Based Vesting
	Number of Common Shares	Weighted-Average Grant Date Fair Value		Number of Common Shares	Weighted-Average Grant Date Fair Value
Outstanding at January 1	43,679	$	29.64	175,772	$	31.08
Awarded	16,153	31.35		117,773	32.20
Released	22,750	24.73		33,400	17.86
Forfeited	4,852	35.87		6,261	33.21
Outstanding at December 31	32,230	$	33.05	253,884	$	33.29

The total intrinsic value of restricted common shares released was $1.8 million, $2.8 million and $1.1 million in 2019, 2018 and 2017, respectively.

Performance Unit Awards

Under the 2006 Equity Plan, Peoples may grant performance unit awards to officers, key employees and non-employee directors. On July 26, 2017, Peoples granted a total of seven performance unit awards to officers, with a maximum aggregate dollar amount of $1.3 million represented by the performance units subject to such awards and each performance unit representing $1.00. During 2019, one of the seven performance unit awards was forfeited as the individual to whom the performance unit award was granted left Peoples before meeting the minimum service requirement to retain the performance unit award. The performance unit awards granted cover the performance period beginning January 1, 2018 and ending on December 31, 2019, and are subject to two performance goals. Twenty-five percent of the performance units subject to each award will vest if, but only if, the related company-specific target performance goal is achieved. As of December 31, 2019, the target level of achievement for the company-specific target performance goal was reached for the performance period. The remaining 75% of the performance units subject to each award will vest based on the relative performance of Peoples compared to a defined peer group (measured by percentile ranking) with respect to the related maximum performance goal. As of December 31, 2019, Peoples did not achieve the second performance goal. On February 27, 2020, the Compensation Committee of the Board of Directors certified the level of achievement of the performance goals that had been satisfied and a portion of the performance unit awards vested based on the performance achieved. The vested performance unit awards were settled in common shares of Peoples equal to (i) the aggregate number of the participant's performance units (and equivalent dollar value of such performance units) that vested based on the performance achieved under both performance goals (ii) divided by the fair market value of a common share of Peoples on the date the performance units were deemed to have vested (which was the certification date) and rounded down to the nearest whole common share.

Stock-Based Compensation

Peoples recognizes stock-based compensation, which is included as a component of Peoples’ salaries and employee benefit costs, for restricted common shares and performance unit awards, as well as purchases made by participants in the employee stock purchase

plan. For restricted common shares, Peoples recognizes stock-based compensation based on the estimated fair value of the awards expected to vest on the grant date. The estimated fair value is then expensed over the vesting period, which is normally three years. For performance unit awards, Peoples recognizes stock-based compensation, over the performance period, based on the portion of the awards that is expected to vest based on the expected level of achievement of the two performance goals. Peoples also has an employee stock purchase plan whereby employees can purchase Peoples' common shares at a discount of up to 15%. The following summarizes the amount of stock-based compensation and related tax benefit recognized for the years ended December 31:


(Dollars in thousands)	2019		2018		2017
Employee stock-based compensation expense:
Stock grant expense	$	3,462	$	2,359	$	1,747
Employee stock purchase plan expense	63		60		55
Performance stock unit expense	130		156		—
Total employee stock-based compensation expense	3,655		2,575		1,802
Non-employee director stock-based compensation expense	308		345		322
Total stock-based compensation expense	3,963		2,920		2,124
Recognized tax benefit	(832)		(613)		(446)
Net expense recognized	$	3,131	$	2,307	$	1,678

Restricted common shares were the primary form of stock-based compensation awards granted by Peoples in 2019, 2018 and 2017. The fair value of restricted common share awards on the grant date is the market price of Peoples' common shares. Total unrecognized stock-based compensation related to unvested restricted common share awards was $2.8 million at December 31, 2019, which will be recognized over a weighted-average period of 1.9 years. In 2019, the Board of Directors granted 3,200 unrestricted common shares to non-employee directors, with related stock-based compensation of $102,400.