Stock-Based Compensation

6 Months Ended

Jun. 30, 2021

Share-based Payment Arrangement [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 2020 and 2021, Peoples granted unrestricted common shares to non-employee directors (in addition to their directors' fees paid in common shares). 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 the first six months of 2021, Peoples granted an aggregate of 76,819 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.

The following table summarizes the changes to Peoples’ restricted common shares for the six months ended June 30, 2021:


	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	67,758	$	23.71	250,992	$	33.36
Awarded	21,122	33.14		76,819	31.48
Released	4,877	34.98		73,611	35.43
Forfeited	500	34.75		4,107	32.57
Outstanding at June 30	83,503	$	25.37	250,093	$	32.19

For the six months ended June 30, 2021, the total intrinsic value for restricted common shares released was $2.5 million compared to $2.0 million for the six months ended June 30, 2020.

Stock-Based Compensation

Peoples recognizes stock-based compensation, which is included as a component of Peoples’ salaries and employee benefit costs, for restricted and unrestricted 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 recognized stock-based compensation over the performance period, based on the portion of the awards that was 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 15%. The following table summarizes the amount of stock-based compensation expense and related tax benefit recognized for each period:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2021		2020		2021		2020
Employee stock-based compensation expense:
Stock grant expense	$	585	$	955	$	1,784	$	2,335
Employee stock purchase plan expense	18		15		$	34	$	30
Performance unit benefit	—		—		$	—	$	(12)
Total employee stock-based compensation expense	603		970		$	1,818	$	2,353
Non-employee director stock-based compensation expense	55		53		$	250	$	235
Total stock-based compensation expense	658		1,023		$	2,068	$	2,588
Recognized tax benefit	(138)		(214)		(434)		(543)
Net stock-based compensation expense	$	520	$	809	$	1,634	$	2,045

Restricted common shares were the primary form of stock-based compensation awards granted by Peoples in the six months ended June 30, 2021 and 2020. The fair value of restricted common share awards on the grant date is the market price of Peoples' common shares on that date. Total unrecognized stock-based compensation expense related to unvested restricted common share awards was $3.7 million at June 30, 2021, which will be recognized over a weighted-average period of 2.1 years. On April 1, 2020, an aggregate of 18,952 unrestricted common shares were granted as a one-time special award to employees under the level of Vice

President, with a related stock-based compensation expense of $396,000 being recognized.

In addition to the portion of directors' fees paid in common shares, non-employee director stock-based compensation expense included $135,000 during the first six months of 2021, and $120,000 during the first six months of 2020, reflecting separate grants of unrestricted common shares aggregating 4,347 and 3,680 common shares, respectively.