Note 15 - Stock-based Compensation

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

NOTE 15. STOCK-BASED COMPENSATION

Equity Incentive Plan. The Company’s Amended and Restated 2017 Long-Term Incentive Compensation Plan (the “Plan”) authorizes the grant of various types of equity awards, such as restricted stock, restricted stock units, stock options and stock appreciation rights to eligible participants, which include all of the Company’s employees, non-employee directors, and consultants. The Plan has reserved a total of 1,200,000 shares of common stock, 600,000 of which were authorized in 2021, for issuance to eligible participants pursuant to equity awards under the Plan. The Plan is administered by the Compensation Committee of the Company’s board of directors, which determines, within the provisions of the Plan, those eligible employees to whom, and the times at which, equity awards will be granted. The Compensation Committee, in its discretion, may delegate its authority and duties under the Plan to specified officers; however, only the Compensation Committee may approve the terms of equity awards to the Company’s executive officers and directors. At December 31, 2021, approximately 723,762 shares remain available for grant.

Stock Options

During the years ended December 31, 2021, 2020 and 2019, the Company granted 38,450, 58,993, and 36,984 stock options, respectively, to key personnel that vest in one-fifth increments on each of the first five anniversaries of the grant date.

The table below summarizes the Company’s stock option activity for the periods indicated.

Stock Options
	Shares			Weighted Average Price		Weighted Average Remaining Contractual Term (Years)
Outstanding at December 31, 2018		340,646		$	15.98		6.49
Granted		36,984			24.40
Forfeited		—			—
Exercised		(20,416	)		14.06
Outstanding at December 31, 2019		357,214			16.96		5.93
Granted		58,993			16.96
Forfeited		(4,585	)		21.36
Exercised		(3,334	)		14.00
Outstanding at December 31, 2020		408,288			17.66		5.57
Granted		38,450			20.72
Forfeited		(30,869	)		19.56
Exercised		(47,388	)		15.44
Outstanding at December 31, 2021		368,481			18.10		5.05
Exercisable at December 31, 2021		262,392		$	16.55		3.96

The aggregate intrinsic value of stock options is calculated as the aggregate difference between the exercise price of the stock options and the fair market value of the Company’s common stock for those stock options having an exercise price lower than the fair market value of the Company’s common stock. At December 31, 2021, the shares underlying outstanding and exercisable stock options had an intrinsic value of $0.8 million.

The Company uses a Black-Scholes option pricing model to estimate the fair value of stock-based awards. The Black-Scholes option pricing model incorporates various subjective assumptions, including expected term and expected volatility. Stock option expense in the accompanying consolidated statements of income for the years ended  December 31, 2021, 2020 and 2019 was $0.2 million, $0.2 million and $0.3 million, respectively. At December 31, 2021, there was $0.3 million of unrecognized compensation cost related to stock options that is expected to be recognized over a weighted average period of 2.5 years.

The table below shows the assumptions used for the stock options granted during the years ended December 31, 2021 and 2020.

	2021			2020
Dividend yield		1.35	%		1.12	%
Expected volatility		39.23	%		26.39	%
Risk-free interest rate		1.25	%		0.99	%
Expected term (in years)		6.5			6.5
Weighted average grant date fair value	$	7.23		$	5.17

Restricted Stock and Restricted Stock Units

Under the Plan, the Company may grant restricted stock, restricted stock units, and other stock-based awards to Plan participants, subject to forfeiture upon the occurrence of certain events until the dates specified in the participant’s award agreement. While restricted stock is subject to forfeiture, holders of restricted stock may exercise full voting rights and will receive all dividends paid with respect to the restricted shares. Restricted stock units (“RSUs”) do not have voting rights and do not receive dividends or dividend equivalents. The restricted stock and RSUs granted under the Plan are typically subject to a vesting period. Compensation expense for restricted stock and RSUs is determined based on the market price of the Company’s common stock at the grant date and is applied to the total number of shares or units granted and is recognized on a straight-line basis over the requisite service period of generally five years for employees and two years for non-employee directors. Upon vesting of restricted stock and RSUs, the benefit of tax deductions in excess of recognized compensation expense is reflected as an income tax benefit in the Consolidated Statements of Income.

Historically, the Company has granted restricted stock awards to Plan participants. Beginning in 2019, the Company granted time vested RSUs to its non-employee directors and certain officers of the Company with vesting terms ranging from two years to five years.

The Company granted a total of 129,082 RSUs to employees and directors for the year ended December 31, 2021. Of the RSUs issued in 2021, 105,294 shares will vest over five years and 23,788 shares will vest over two years.

The Company granted a total of 102,953 RSUs to employees and directors for the year ended December 31, 2020. Of the RSUs issued in 2020, 91,268 shares will vest over five years and 11,685 shares will vest over two years.

The Company granted a total of 79,439 shares of restricted stock to employees for the year ended December 31, 2019. Of the RSUs issued in 2019, 68,430 shares will vest over five years and 11,009 shares will vest over two years.

Compensation expense related to restricted stock and RSUs in the accompanying consolidated statements of income for the years ended  December 31, 2021, 2020 and 2019 was $1.6 million, $1.4 million and $1.1 million, respectively. The unearned compensation related to these awards is amortized to compensation expense over the vesting period. As of December 31, 2021, 2020 and 2019, unearned stock-based compensation associated with these awards totaled approximately $3.7 million, $3.4 million and $2.8 million, respectively. The $3.7 million of unrecognized compensation cost related to time vested restricted stock and RSUs at December 31, 2021 is expected to be recognized over a weighted average period of 3.2 years.

The following table summarizes the restricted stock and RSU activity for the years ended December 31, 2021 and December 31, 2020.

	December 31,
	2021					2020
	Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value
Balance, beginning of period		207,146		$	22.23		168,216		$	22.43
Granted		129,082			19.91		102,953			21.41
Forfeited		(29,642	)		21.79		(10,283	)		22.16
Earned and issued		(65,516	)		21.64		(53,740	)		21.29
Balance, end of period		241,070		$	21.16		207,146		$	22.23