Note 8 - Stock-based Compensation

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

Note 8.  Stock-based Compensation 

The Company’s stockholders approved the 2017 Equity Compensation Plan (“the Plan”) on May 23, 2017. The Plan eliminates all remaining issuable shares under previous plans and is the only outstanding plan as of September 30, 2023. On May 30, 2023, the Company's stockholders approved an amendment to the Plan that increased the maximum number of shares issuable by 450,000. The maximum number of shares of common stock or equivalents which may be issued under the Plan is now 1,200,000. Grants under the Plan can be in the form of stock options (qualified or non-qualified), restricted shares, deferred stock units or performance units. Shares available for grant and issuance under the Plan as of September 30, 2023 were approximately 469,501. The Company intends to issue all shares under the Plan in the form of newly issued shares.

Restricted stock, options and deferred stock units typically have a three-year vesting period starting one year after the date of grant with one-third vesting each year. The options generally expire ten years from the date of grant. Restricted stock and deferred stock units granted to new employees and board members may be granted with shorter vesting periods. Grants of performance units typically have a cliff vesting after three years or upon a change of control. All issuances are subject to forfeiture if the recipient is no longer employed prior to the award's vesting. Any forfeitures would result in previously recognized expense being reversed. Restricted stock grants have the same dividend and voting rights as common stock, while options, performance units and deferred stock units do not.

All awards are issued at the fair value of the underlying shares at the grant date. The Company expenses the cost of the awards, which is determined to be the fair market value of the awards at the date of grant, ratably over the vesting period. Forfeiture rates are not estimated but are recorded as incurred. Stock-based compensation expense for the three and nine months ended September 30, 2023 was $1.3 million and $3.6 million, respectively.  Stock-based compensation expense for the three and nine months ended September 30, 2022 was $1.2 million and $3.5 million, respectively.

 Activity under the Company’s options for the nine months ended September 30, 2023 was as follows:

	Number of Stock Options			Weighted-Average Exercise Price
Outstanding as of December 31, 2022		8,680		$	12.95
Exercised		(7,388	)		12.73
Forfeited/cancelled/expired		(1,292	)		14.24
Outstanding as of September 30, 2023		-			-
Exercisable as of September 30, 2023		-		$	-

Activity under the Company’s restricted stock for the nine months ended September 30, 2023 was as follows:

	Nonvested Shares			Weighted Average Grant Date Fair Value
Nonvested as of December 31, 2022		85,931		$	26.20
Granted		93,147			16.19
Vested		(47,067	)		27.59
Forfeited/cancelled/expired		(9,090	)		21.76
Nonvested as of September 30, 2023		122,921		$	18.41

As of September 30, 2023, there was approximately $1.1 million of total unrecognized compensation cost related to nonvested restricted stock granted. The cost is expected to be recognized over a weighted average period of 1.2 years.

A summary of the status of unearned performance unit awards and the change during the period is presented in the table below:

	Units (expected)			Units (maximum)		Weighted Average Grant Date Fair Value
Unearned as of December 31, 2022		195,265				$	17.98
Awarded		85,158					17.93
Vested shares		(116,192	)				10.77
Unearned as of September 30, 2023		164,231			233,087	$	23.06

As of September 30, 2023, the specific number of shares related to performance units that were expected to vest was 164,231, determined by actual performance in consideration of the established range of the performance targets, which is consistent with the level of expense currently being recognized over the vesting period. Should this expectation change, additional compensation expense could be recorded in future periods or previously recognized expense could be reversed. As of September 30, 2023, the maximum amount of performance units that ultimately could vest if performance targets were exceeded is 233,087. During the nine months ended September 30, 2023, 116,192 shares vested. A total of 63,839 shares were netted from the vested shares to satisfy employee tax obligations. The net shares issued from vesting of performance units during the nine months ended September 30, 2023 were 52,353 shares. As of September 30, 2023, compensation cost of approximately $1.8 million related to non-vested performance units not yet recognized is expected to be recognized over a weighted-average period of 1.9 years.

A summary of the status of unearned deferred stock units and the changes in deferred stock units during the period is presented in the table below:

	Units (expected)			Weighted Average Grant Date Fair Value
Unearned as of December 31, 2022		120,035		$	23.84
Awarded		146,857			18.97
Vested shares		(78,544	)		19.71
Unearned as of September 30, 2023		188,348		$	21.77

Any forfeitures would result in previously recognized expense being reversed. A portion of the shares that vest will be netted out to satisfy the tax obligations of the recipient. During the nine months ended September 30, 2023, 78,544 shares vested. A total of 42,538 shares were netted from the vested shares to satisfy employee tax obligations. The net shares issued from vesting of deferred stock units during the nine months ended September 30, 2023 were 36,006 shares. As of September 30, 2023, compensation cost of approximately $2.3 million related to non-vested deferred stock units, not yet recognized, is expected to be recognized over a weighted-average period of 1.5 years.