Note 7 - Stock Plans

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

7. Stock plans

The Company has one stock-based compensation plan (the stock compensation plan) from which it can grant stock-based compensation awards and applies the fair value method of accounting for stock-based compensation provided under current accounting guidance. The guidelines require the cost of share-based payment transactions (including those with employees and non-employees) be recognized in the financial statements. The Company’s stock compensation plan was shareholder-approved and permits the grant of share-based compensation awards to its employees and directors. The Company believes that the stock-based compensation plan will advance the development, growth and financial condition of the Company by providing incentives through participation in the appreciation in the value of the Company’s common stock. In return, the Company hopes to secure, retain and motivate the employees and directors who are responsible for the operation and the management of the affairs of the Company by aligning the interest of its employees and directors with the interest of its shareholders. In the stock compensation plan, employees and directors are eligible to be awarded stock-based compensation grants which can consist of stock options (qualified and non-qualified), stock appreciation rights (SARs) and restricted stock.

At the 2022 annual shareholders' meeting, the Company's shareholders approved and the Company adopted the 2022 Omnibus Stock Incentive Plan which replaced the 2012 Omnibus Stock Incentive Plan and the 2012 Director Stock Incentive Plan (collectively, the 2012 stock incentive plans). The 2012 stock incentive plans expired in 2022. Unless terminated by the Company’s board of directors, the 2022 Omnibus Stock Incentive Plan will expire on and no stock-based awards shall be granted after the year 2032.

In the 2022 Omnibus Stock Incentive Plan, the Company has reserved 500,000 shares of its no-par common stock for future issuance. The Company recognizes share-based compensation expense over the requisite service or vesting period. Since 2019, the Company has approved a Long-Term Incentive Plan (LTIP) each year that awarded restricted stock and/or stock-settled stock appreciation rights (SSARs) to senior officers and managers based on the attainment of performance goals. The SSAR awards have a ten-year term from the date of each grant.

During the first quarter of 2023, the Company approved a LTIP and awarded restricted stock to senior officers and managers in February 2023 based on 2022 performance.

During the first quarter of 2022, the Company approved a LTIP and awarded restricted stock to senior officers and managers in February 2022 based on 2021 performance.

The following table summarizes the weighted-average fair value and vesting of restricted stock grants awarded during the periods ended March 31, 2023 and 2022 under the 2022 and 2012 stock incentive plans:

	March 31, 2023					March 31, 2022
				Weighted-					Weighted-
	Shares			average grant		Shares			average grant
	granted			date fair value		granted			date fair value
Director plan		-		$	-		18,000	(2)	$	49.85
Omnibus plan		18,000	(2)		49.43		16,520	(3)		49.85
Omnibus plan		17,684	(3)		49.43
Omnibus plan		50	(1)		49.43
Total		35,734		$	49.43		34,520		$	49.85

⁽¹⁾ Vest after 1 year ⁽²⁾ Vest after 3 years – 33% each year ⁽³⁾ Vest fully after 3 years

The fair value of the shares granted in 2023 and 2022 was calculated using the grant date closing stock price.

A summary of the status of the Company’s non-vested restricted stock as of and changes during the period indicated are presented in the following table:

	2012 & 2022 Stock incentive plans
	Director			Omnibus			Total			Weighted- average grant date fair value
Non-vested balance at December 31, 2022		23,872			38,614			62,486		$	51.46
Granted		-			35,734			35,734			49.43
Forfeited		-			-			-			-
Vested		(9,736	)		(10,713	)		(20,449	)		53.24
Non-vested balance at March 31, 2023		14,136			63,635			77,771		$	50.06

A summary of the status of the Company’s SSARs as of and changes during the period indicated are presented in the following table:

	Awards		Weighted-average grant date fair value		Weighted-average remaining contractual term (years)
Outstanding December 31, 2022		87,133	$	9.69		4.5
Granted		-
Exercised		-
Forfeited		-
Outstanding March 31, 2023		87,133	$	9.69		4.3

Of the SSARs outstanding at March 31, 2023, all SSARs vested and were exercisable.

There were no SSARs exercised during the first quarters of 2023 and 2022. 

Share-based compensation expense is included as a component of salaries and employee benefits in the consolidated statements of income. The following tables illustrate stock-based compensation expense recognized on non-vested equity awards during the three months ended March 31, 2023 and 2022 and the unrecognized stock-based compensation expense as of March 31, 2023:

	Three months ended March 31,
(dollars in thousands)	2023		2022
Stock-based compensation expense:
2012 Director stock incentive plan	$	114	$	109
2012 Omnibus stock incentive plan		141		165
2022 Omnibus stock incentive plan		156		-
Employee stock purchase plan		34		32
Total stock-based compensation expense	$	445	$	306

	As of
(dollars in thousands)	March 31, 2023
Unrecognized stock-based compensation expense:
2012 Director stock incentive plan	$	658
2012 Omnibus stock incentive plan		670
2022 Omnibus stock incentive plan		1,611
Total unrecognized stock-based compensation expense	$	2,939

The unrecognized stock-based compensation expense as of March 31, 2023 will be recognized ratably over the periods ended February 2025, February 2025 and February 2026 for the 2012 Director Stock Incentive Plan, 2012 Omnibus Stock Incentive Plan and 2022 Omnibus Stock Incentive Plan, respectively.

In addition to the 2022 stock incentive plan, the Company established the 2002 Employee Stock Purchase Plan (the ESPP) and reserved 165,000 shares of its un-issued capital stock for issuance under the plan. The ESPP was designed to promote broad-based employee ownership of the Company’s stock and to motivate employees to improve job performance and enhance the financial results of the Company. Under the ESPP, participation is voluntary whereby employees use automatic payroll withholdings to purchase the Company’s capital stock at a discounted price based on the fair market value of the capital stock as measured on either the commencement or termination dates, as defined. As of March 31, 2023,101,827 shares have been issued under the ESPP. The ESPP is considered a compensatory plan and is required to comply with the provisions of current accounting guidance. The Company recognizes compensation expense on its ESPP on the date the shares are purchased, and it is included as a component of salaries and employee benefits in the consolidated statements of income.

During the second quarter of 2022, the Company announced that the Board of Directors approved a plan to purchase, in open market and privately negotiated transactions, up to 3% of its outstanding common stock. As of March 31, 2023, the Company had repurchased 32,554 shares of common stock at an average price of $38.81 under the treasury stock repurchase plan.