Quarterly report pursuant to Section 13 or 15(d)

STOCK BASED AND DEFERRED COMPENSATION

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STOCK BASED AND DEFERRED COMPENSATION
 9 Months Ended
Sep. 30, 2022
Share-Based Payment Arrangement [Abstract]  
STOCK BASED AND DEFERRED COMPENSATION STOCK BASED AND DEFERRED COMPENSATION
We have a stock compensation plan, the Meritage Homes Corporation 2018 Stock Incentive Plan (the “2018 Plan"), that was approved by our Board of Directors and our stockholders and adopted in May 2018. The 2018 Plan is administered by our Board of Directors and allows for the grant of stock appreciation rights, restricted stock awards, restricted stock units, performance share awards and performance-based awards in addition to non-qualified and incentive stock options. All available shares from expired, terminated, or forfeited awards that remained under prior plans were merged into and became available for grant under the 2018 Plan. The 2018 Plan authorizes awards to officers, key employees, non-employee directors and consultants. The 2018 Plan authorizes 6,600,000 shares of stock to be awarded, of which 731,405 shares remain available for grant at September 30, 2022. We believe that such awards provide a means of performance-based compensation to attract and retain qualified employees and better align the interests of our employees with those of our stockholders. Non-vested stock awards are usually granted with a five-year ratable vesting period for employees, a three-year cliff vesting for both restricted stock and performance-based awards granted to senior executive officers and either a three-year cliff vesting or one-year vesting for non-employee directors, dependent on their start date.
Compensation cost related to time-based restricted stock awards is measured as of the closing price on the date of grant and is expensed, less forfeitures, on a straight-line basis over the vesting period of the award. Compensation cost related to performance-based restricted stock awards is also measured as of the closing price on the date of grant but is expensed in accordance with ASC 718-10-25-20, Compensation – Stock Compensation ("ASC 718"), which requires an assessment of probability of attainment of the performance target. As our performance targets are dependent on performance over a specified measurement period, once we determine that the performance target outcome is probable, the cumulative expense is recorded immediately with the remaining expense recorded on a straight-line basis through the end of the award vesting period. A portion of the performance-based restricted stock awards granted to our executive officers contain market conditions as defined by ASC 718. ASC 718 requires that compensation expense for stock awards with market conditions be expensed based on a derived grant date fair value and expensed over the service period. We engage a third party to perform a valuation analysis on the awards containing market conditions and our associated expense with those awards is based on the derived fair value from that analysis and is expensed straight-line over the service period of the awards. Below is a summary of stock-based
compensation expense and stock award activity (dollars in thousands):
  Three Months Ended September 30, Nine Months Ended September 30,
  2022 2021 2022 2021
Stock-based compensation expense $ 6,852  $ 5,845  $ 16,897  $ 14,435 
Non-vested shares granted 13,478  4,114  278,340  225,666 
Performance-based non-vested shares granted 3,322  —  43,326  46,593 
Performance-based shares issued in excess of target shares granted (1)
—  —  37,146  37,425 
Restricted stock awards vested (includes performance-based awards) 4,418  3,615  396,578  438,344 
(1)Performance-based shares that vested and were issued as a result of performance achievement exceeding the originally established targeted number of shares related to respective performance metrics.
The following table includes additional information regarding our stock compensation plan (dollars in thousands):
  As of
  September 30, 2022 December 31, 2021
Unrecognized stock-based compensation cost $ 33,823  $ 25,007 
Weighted average years expense recognition period 2.02 1.97
Total equity awards outstanding (1)
803,769  883,280 
(1)Includes unvested restricted stock awards, restricted stock units and performance-based awards (assuming 100%/target payout).
We also offer a non-qualified deferred compensation plan ("deferred compensation plan") to highly compensated employees in order to allow them additional pre-tax income deferrals above and beyond the limits that qualified plans, such as 401(k) plans, impose on highly compensated employees. We do not currently offer a contribution match on the deferred compensation plan. All contributions to the plan to date have been funded by the employees and, therefore, we have no associated expense related to the deferred compensation plan for the three or nine months ended September 30, 2022 or 2021, other than minor administrative costs.