Note 6 - Stock-based Compensation Plan

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

6. Stock-Based Compensation Plan

On May 20, 2009, the Company adopted the 2009 Equity Incentive Plan (the “2009 Plan”) which terminated as of May 20, 2019.  The 2009 Plan provided for the award of stock options, restricted stock, performance shares and stock appreciation rights.  The aggregate number of shares of the Company’s common stock available for issuance under the 2009 Plan could not exceed 223,000 shares and 176,150 shares were still available for issuance under the 2009 Plan at its termination. 

On May 22, 2019, the Company adopted the 2019 Equity Incentive Plan (the “2019 Plan”).  The 2019 Plan provides for the award of stock options, restricted stock, performance shares and stock appreciation rights.  The aggregate number of shares of the Company’s common stock available for issuance under the 2019 Plan may not exceed 176,150 shares.  If an award under the 2009 Plan is canceled, terminates, expires, is forfeited or lapses for any reason, any issued shares subject to the award shall not be available for issuance pursuant to awards subsequently granted under the 2019 Plan.  Further, no additional participants, as that term is defined in the 2009 Plan, are eligible for grants of awards under the 2009 Plan.  The Company generally issues new shares under the 2019 Plan from its authorized but unissued shares.

At September 30, 2022, 162,350 shares of the Company’s common stock were available for issuance under the 2019 Plan.  The Company may grant both non-statutory and statutory stock options which may not have a term exceeding ten years.  In the case of incentive stock options, the aggregate fair value of the stock (determined at the time the incentive stock option is granted) for which any optionee may be granted incentive options which are first exercisable during any calendar year shall not exceed $100,000. Option prices may not be less than the fair market value of the underlying stock at the date of the grant.  An award of a performance share is a grant of a right to receive shares of the Company’s common stock which is contingent upon the achievement of specific performance criteria or other objectives set at the grant date.  Stock appreciation rights are equity or cash settled share-based compensation arrangements whereby the number of shares that will ultimately be issued or the cash payment is based upon the appreciation of the Company’s common stock.  Awards granted under the 2019 Plan may be granted either alone, in addition to, or in tandem with, any other award granted under the 2019 Plan.  The terms of the 2019 Plan also include provisions whereby all unearned options and restricted shares become immediately exercisable and fully vested upon a change in control.

The fair market value of stock options granted is estimated at the date of grant using an option pricing model.  Expected volatilities are based on historical volatility of the Company's stock.  The expected term of options granted represents the period of time that options are expected to be outstanding and is based on historical trends.  The risk free rate for the expected life of the options is based on the U.S. Treasury yield curve in effect at the time of grant.  As of September 30, 2022, no stock options had been granted under the Plans.

Compensation expense is measured based on the fair market value of the restricted stock at the grant date and is recognized ratably over the period during which the shares are earned (the vesting period).  The Company accounts for any forfeitures when they occur, and any previously recognized compensation for an award is reversed in the period the award is forfeited.  Compensation expense related to restricted stock recognized for the three-month and nine-month periods ended September 30, 2022 amounted to $156,000 and $352,000, respectively. Compensation expense related to restricted stock recognized for the three-month and nine-month periods ended September 30, 2021 amounted to $129,000 and $359,000, respectively.  The total income tax benefit related to stock-based compensation was $44,000 for the nine-month period ended September 30, 2022.  The total income tax expense related to stock-based compensation was $3,000 for the three-month period ended September 30, 2022.  The total income tax benefit related to stock-based compensation was $18,000 and $73,000, respectively, for the three-month and nine-month periods ended September 30, 2021.

A summary of the Company’s nonvested restricted shares under the Plan as of September 30, 2022 and changes during the nine-month period then ended is presented below.

			Weighted
	Number		Average
	of		Grant Date
	shares		Fair Value
Nonvested at January 1, 2022	22,350	$	54.96
Granted	-		-
Vested	8,950		51.85
Forfeited	850		56.76
Nonvested at September 30, 2022	12,550	$	57.07

There were 8,950 shares that vested during the nine-month period ended September 30, 2022 due to the retirement of an employee and normal vesting, and 8,350 restricted shares vested during the nine-month period ended September 30, 2021 due to normal vesting.  The fair value of restricted shares that vested during the nine-month periods ended September 30, 2022 and 2021 was $260,000 and $371,000, respectively.  At September 30, 2022, there was $633,000 of unrecognized compensation expense related to nonvested restricted shares.  The compensation expense is expected to be recognized over a weighted average period of 2.1 years.