Stock-based Compensation

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

Stock Options and Restricted Stock

The Company currently has one active stockholder approved stock-based compensation plan, the Amended and Restated 2013 Equity Incentive Plan (the "2013 Plan"). The 2013 Plan permits the grant of restricted stock, restricted stock units, stock options, and stock appreciation rights. The equity incentive plan approved by stockholders in 2008 (the"2008 Plan") expired in November 2018 and no further awards may be made under the 2008 Plan; provided, however, all awards outstanding under the 2008 Plan remain outstanding in accordance with their terms. Under the 2013 Plan, 181,750 shares of common stock were approved for awards for stock options and stock appreciation rights and 116,700 shares of common stock were approved for awards for restricted stock and restricted stock units.

As of March 31, 2023, on an adjusted basis, awards for stock options totaling 295,581 shares and awards for restricted stock totaling 159,396 shares of Company common stock have been granted, net of any forfeitures, to participants in the 2013 Plan and the 2008 Plan. Share-based compensation expense was $192 thousand and $203 thousand for the three months ended March 31, 2023 and March 31, 2022, respectively.

Stock Option Awards

All stock option awards granted under the 2008 Plan vest in 20% annual increments commencing one year from the grant date in accordance with the requirements of the 2008 Plan. The stock option awards granted to date under the 2013 Plan provide for immediate vesting of a portion of the award with the balance of the award vesting on the anniversary date of each grant date in

equal annual installments over periods of one-to-four years subject to the continued service of the participant with the Company. All of the options granted under the 2008 Plan and the 2013 Plan are exercisable for a period of 10 years from the date of grant, subject to vesting.

The following is a summary of the Company’s stock option award activity during the three months ended March 31, 2023 (dollars in thousands, except per share amounts):


	Shares	Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term in Years	Aggregate Intrinsic Value
Outstanding at January 1, 2023	91,525	$	27.64	4.65	$	1,109
Granted	12,425	40.13
Exercised	(14,353)	17.23
Forfeited	(328)	42.02
Expired	—	—

Outstanding at March 31, 2023	89,269	31.00		5.68	647
Exercisable	66,924	28.23		4.61	627
Expected to vest, assuming a 0% forfeiture rate over the vesting term	89,269	$	31.00	5.68	$	647

As of March 31, 2023, there was $199 thousand of total unrecognized compensation cost related to non-vested stock options granted under the Plans. The cost is expected to be recognized over the remaining weighted-average vesting period of approximately 2.9 years. The total intrinsic value of the shares exercised during the three months ended March 31, 2023 and 2022 was $327 thousand and $54 thousand, respectively.

The fair value of each option grant is estimated as of the grant date using the Black-Scholes option-pricing model. The fair value of options granted during the three months ended March 31, 2023 and 2022 were determined using the following weighted-average assumptions as of the grant date.


	Three Months Ended March 31,
		2023			2022
Annual dividend yield		1.69		%	1.59		%
Expected volatility		28.15		%	26.48		%
Risk-free interest rate		3.60		%	1.64		%
Expected term		6.00 years			6.00 years
Weighted-average grant date fair value per option granted		$	11.33		$	9.95

There were 12,425 and 12,800 options granted during the three months ended March 31, 2023 and March 31, 2022, respectively.

Restricted Stock Awards

The fair value of the restricted stock awards is equal to the fair value of the Company's stock at the date of grant. Compensation expense is recognized over the vesting period that the awards are based. The restricted stock awards granted under the 2008 Plan vest in 20% annual increments commencing one year from the grant date. The restricted stock awards granted to date under the 2013 Plan provide for immediate vesting of a portion of the award with the balance of the award vesting on the anniversary dates of the grant date in equal annual installments over periods of one-to-four years subject to the continued service of the participant with the Company.

The following is a summary of the Company’s non-vested restricted stock award activity during the three months ended March 31, 2023:


	Shares	Weighted-Average Grant-Date Fair Value Per Share		Aggregate Intrinsic Value Per Share
Non-Vested at January 1, 2023	17,879	$	37.63
Granted	8,850	40.13
Vested	(9,962)	37.14
Forfeited	(425)	41.95
Non-Vested at March 31, 2023	16,342	39.17		37.01
Expected to vest assuming a 0% forfeiture rate over the vesting term	16,342	$	39.17	$	37.01

As of March 31, 2023, there was $594 thousand of unrecognized compensation cost related to non-vested restricted stock granted under the Plans. The cost is expected to be recognized over the weighted-average vesting period of 2.7 years. The total fair value of shares vested for the three months ended March 31, 2023 and 2022 was $370 thousand and $306 thousand, respectively.

Employee Stock Ownership Plan

The fair value of the 155,135 shares held by the Company’s Employee Stock Ownership Plan (the “ESOP”) trust was $6.1 million at March 31, 2023. ESOP compensation expense included in salaries and benefits was $204 thousand and $205 thousand for the three months ended March 31, 2023 and March 31, 2022, respectively.