Stock-Based Compensation

12 Months Ended

Dec. 31, 2022

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

NOTE 21 – Stock-Based Compensation

Compensation cost is recognized for stock options and restricted stock awards issued to employees and non-employee directors. Compensation cost is measured as the fair value of these awards on their date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used as the fair value of restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period for stock option and restricted stock awards.

The Company’s stock incentive programs are long-term retention programs intended to attract, retain, and provide incentives for key employees and non-employee directors in the form of incentive and non-qualified stock options and restricted stock.

Stock-based compensation expense was recorded as follows:

	For the years ended December 31,
(dollars in thousands)	2022		2021		2020
Stock option expense	$	927		1,148		1,017
Restricted stock grant expense		1,099		499		380
Total stock-based compensation expense	$	2,026		1,647		1,397

Stock Options

The Company’s 2010 Incentive Plan, as amended, had available for issuance a total of 566,025 shares (adjusted for the 10% stock dividends in 2013, 2012, and 2011). The Plan expired on March 16, 2020 and no further shares may be issued from the plan.

On March 15, 2016, the Company adopted the 2016 Equity Incentive Plan, making available for issuance 400,000 stock options. The Plan expired on March 15, 2021 and no further shares may be issued from the plan.

On March 17, 2020, the Company adopted the 2020 Equity Incentive Plan, making available for issuance up to 450,000 stock options. The options may be exercised at an exercise price per share based on the fair market value and determined on the date of grant and expire 10 years from the grant date. As of December 31, 2022, there were 370,824 shares available for grant under the 2020 Equity Incentive Plan.

A summary of the status of the stock option plan and changes for the period is presented below: 

	For the years ended December 31,
	2022							2021							2020
						Weighted							Weighted							Weighted
				Weighted		Average					Weighted		Average					Weighted		Average
				average		Remaining					average		Remaining					average		Remaining
				exercise		Contractual					exercise		Contractual					exercise		Contractual
	Shares			price		Life		Shares			price		Life		Shares			price		Life
Outstanding at beginning of year		464,724		$	33.97				495,195		$	29.93				541,414		$	26.65
Granted		-			-				121,000			40.45				101,700			37.77
Exercised		(32,375	)		27.94				(127,871	)		23.56				(93,870	)		14.79
Forfeited or expired		(5,125	)		43.14				(23,600	)		38.88				(54,049	)		38.15
Outstanding at end of year		427,224		$	34.32		5.7 years		464,724		$	33.97		6.6 years		495,195		$	29.93		6.4 years
Options exercisable at year-end		287,902		$	32.35		4.8 years		239,340		$	29.68		5.0 years		287,548		$	24.93		5.0 years
Weighted average fair value of options granted during the year				$	-						$	16.40						$	11.37
Shares available for grant		370,824							422,550							136,339

The aggregate intrinsic value (the difference between the Company’s closing stock price on the last trading day of the year and the exercise price, multiplied by the number of in-the-money options) of 427,224 and 464,724 stock options outstanding at December 31, 2022 and 2021 was $4.9 million and $13.3 million, respectively. The aggregate intrinsic value of 287,902 and 239,340 stock options exercisable at December 31, 2022 and 2021 was $3.9 million and $7.9 million, respectively.

The fair value of the option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The following assumptions were used for grants: 

	2022		2021			2020
Dividend yield		n/a		-			-
Expected life		n/a		7 years			7 years
Expected volatility		n/a		38.48	%		25.51	%
Risk-free interest rate		n/a		0.74	%		1.29	%

At December 31, 2022, there was $1.1 million of total unrecognized compensation cost related to nonvested stock option grants. The cost is expected to be recognized over a weighted-average period of 1.9 years. The fair value of stock option grants that vested during 2022, 2021, and 2020 was $1.1 million, $1.1 million and $1.2 million, respectively.

Restricted Stock Grants

On May 17, 2016, the Company adopted the 2016 Equity Incentive Plan which included a provision for the issuance of 50,000 shares of common stock to be issuable as restricted stock grants. The Plan expired on March 17, 2021 and no further shares may be issued from the plan.

On May 12, 2020, the Company adopted the 2020 Equity Incentive Plan which included a provision for the issuance of 450,000 shares of common stock to be issuable as either stock options or restricted stock grants. As of December 31, 2022, there were 370,824 shares available for grant under the 2020 Equity Incentive Plan.

Shares of restricted stock granted to employees under the stock plans are subject to restrictions as to continuous employment for a specified time period following the date of grant. During this period, the holder is entitled to full voting rights and dividends.

A summary of the status of the Company’s nonvested restricted stock and changes for the years ended December 31, 2022, 2021, and 2020 is as follows:

	December 31,
	2022					2021					2020
	Restricted Shares			Weighted Average Grant-Date Fair Value		Restricted Shares			Weighted Average Grant-Date Fair Value		Restricted Shares			Weighted Average Grant-Date Fair Value
Nonvested at beginning of year		41,699		$	44.71		26,099		$	38.05		32,825		$	34.78
Granted		53,376			56.25		26,450			48.56		13,200			39.87
Vested		(14,213	)		43.26		(9,600	)		38.03		(14,051	)		32.06
Forfeited		(525	)		61.14		(1,250	)		38.56		(5,875	)		37.74
Nonvested at end of year		80,337		$	52.53		41,699		$	44.71		26,099		$	38.05

At December 31, 2022, there was $3.3 million of total unrecognized compensation cost related to nonvested restricted stock grants. The cost is expected to be recognized over a weighted-average period of 3.1 years.