E) Dividend Reinvestment Plan Under the Dividend Reinvestment Plan (the plan), we provide holders of our common shares and holders of any other class of shares deemed eligible by our Board of Directors with the opportunity to direct cash dividends paid on any class of their eligible shares towards the purchase of additional common shares. Currently, the Board of Directors has deemed that the holders of all common and preferred shares are eligible to participate in the plan. The plan is open to shareholders residing in Canada. At our option, the common shares may be issued from our treasury at an average market price based on the closing prices of a board lot of common shares on the TSX for the five trading days immediately preceding the dividend payment date, with a discount of 0% to 5% or through the open market at market prices. During the year, 164,251 common shares were issued under the plan from our treasury, with no discount (2021 – 117,000).
16. SHARE-BASED PAYMENTS A) STOCK OPTIONS
The estimated fair value of stock options measured at the grant date is recognized over the applicable vesting period as an increase to both salary expense and share-based payment reserve. When options are exercised, the proceeds received and the applicable amount in share-based payment reserve are credited to common shares.
We have authorized 6,124,606 common shares (2021 – 6,170,861) for issuance under the share incentive plan. Of the amount authorized, options exercisable into 1,871,717 shares (2021 – 1,716,084) are issued and outstanding. The outstanding options vest within three years and are exercisable at a fixed price equal to the average of the market price on the day of and the four days preceding the grant date. Outstanding options expire from March 2023 to December 2028, each with an expiry date that is within seven years of the grant date.
The details of, and changes in, the issued and outstanding options are as follows:
2022
2021
Weighted Average Exercise Price
Weighted Average Exercise Price
Number of Options
Number of Options
Options
Balance at beginning of year
1,716,084
$
30.04 37.03 25.76 32.04 31.86
1,788,818
$
29.39 29.07 26.02 31.89
Granted
363,378
359,048
Exercised or exchanged
(134,739)
(393,696)
Forfeited
(65,501)
(38,086)
Expired
(7,505)
-
-
Balance at End of Year
1,871,717
$
31.63
1,716,084
$
30.04
Exercisable at End of Year
828,134
$
30.29
647,859
$
29.80
Further details relating to stock options outstanding and exercisable are as follows:
Options Outstanding
Options Exercisable
Weighted Average Remaining Contractual Life (years)
Weighted Average Exercise Price
Weighted Average Exercise Price
Number of Options
Number of Options
Range of Exercise Prices
$23.70
124,654
0.4 3.8 4.8
$
23.70 30.31 36.35
124,654 $
23.70 30.00 35.15
$29.07 to $31.93 $35.15 to $37.03
1,199,978
503,586 199,894
547,085
Total
1,871,717
3.8
$
31.63
828,134 $
30.29
All exercised options are settled via cashless settlement, which provides the option holder the number of shares equivalent to the excess of the market value of the shares under option, determined at the exercise date, over the exercise price. During fiscal 2022, option holders exchanged the rights to 134,739 (2021 – 393,696) options and received 46,255 (2021 – 120,904) shares in return by way of cashless settlement. Salary expense of $1,973 (2021 – $1,823) was recognized relating to the estimated fair value of options granted. The fair value of options granted during the year was estimated using a binomial option pricing model with the following variables and assumptions: (i) risk-free interest rate of 1.2% (2021 – 0.5%), (ii) expected option life of 5.0 (2021 – 5.0) years, (iii) expected annual volatility of 34% (2021 – 35%), and (iv) expected annual dividends of 3.3% (2021 – 4.0%). Expected volatility is estimated by evaluating historical volatility of the share price over multi-year periods. The weighted average fair value of options granted was estimated at $7.06 (2021 – $5.87) per share.
During the year, $523 (2021 – $1,556) was transferred from the share-based payment reserve to share capital, representing the estimated fair value recognized for options exercised during the year.
CWB Financial Group 2022 Annual Report | 97
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