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Stock Compensation Plans

12 Months Ended

Dec. 31, 2022

(15)	Stock Compensation Plans

The total number of shares authorized, number of shares outstanding, weighted average exercise prices, exercise prices and weighted average grant date fair value have been adjusted to give retroactive effect to stock dividends and stock splits, including the 5% stock dividend declared on January 26, 2023, payable on March 24, 2023 to shareholders of record as of February 28, 2023.

Under the Company’s 2016 Stock Incentive Plan (the “Plan”), the Company may grant option grants, stock appreciation rights, restricted stock, or stock units to an employee for an amount up to 50,000 total shares in any calendar year. With respect to awards granted to non-employee directors under the Plan during the term of the Plan, the total number of shares of common stock which may be issued upon exercise or settlement of such awards is 100,000 shares and no outside director may receive option grants, stock appreciation rights, restricted stock or stock units for more than 3,000 shares total in any calendar year. There are 894,071 shares authorized under the Plan. The Plan will terminate on March 15, 2026.

The Compensation Committee of the Board of Directors is authorized to prescribe the terms and conditions of each option, including exercise price, vestings, or duration of the option. Generally, option grants vest at a rate of 25% per year after the first anniversary of the date of grant and restricted stock awards vest at a rate of 100% after four years. Options expire 10 years after the date of grant. Options are granted with an exercise price of the fair value of the related common stock on the date of grant.

Stock option activity under the Plan during the year ended December 31, 2022, was as follows:

	Stock Options
	Number of shares			Weighted average exercise price
Balance at December 31, 2021		659,205		$	8.16
Granted		45,113			9.76
Exercised		(19,450	)		3.34
Cancelled/Forfeited		—			—

Balance at December 31, 2022		684,868		$	8.41

The following table presents information on stock options for the year ended December 31, 2022:

	Number of Shares		Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term
Options exercised		19,450	$	3.34	$	125		—

Stock options outstanding and expected to vest:		684,868	$	8.41	$	431		5.28

Stock options vested and currently exercisable:		513,099	$	8.01	$	431		4.52

The weighted average grant date fair value per share of options granted during the years ended December 31, 2022 was $2.22. There were no options granted in 2021.

The intrinsic value of options exercised during the years ended December 31, was $125 in 2022 and $63 in 2021. The fair value of awards vested during the years ended December 31 was $142 in 2022 and $182 in 2021.

At December 31, 2022, outstanding options had a weighted average exercise price of $8.41.

As of December 31, 2022, there was $157 of total unrecognized compensation related to non-vested stock options. This cost is expected to be recognized over a weighted average period of approximately 2.2 years.

For the years ended December 31, 2022 and 2021, there was $121 and $145, respectively, of recognized compensation related to stock options.

The Company determines fair value at grant date using the Black-Scholes-Merton pricing model that takes into account the stock price at the grant date, the exercise price, the risk-free interest rate, the volatility of the underlying stock and the expected life of the option.

The weighted average assumptions used in the pricing model are noted in the following table. The expected term of options granted is derived from historical data on employee exercise and post-vesting employment termination behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. Expected volatility is based on both the implied volatilities from the traded option on the Company’s stock and historical volatility on the Company’s stock.

The Company expenses the fair value of the option on a straight line basis over the vesting period. The Company estimates forfeitures and only recognizes expense for those shares that actually vest.

The following table shows our weighted average assumptions used in valuing stock options granted for the years ended December 31:

	2022			2021
Risk-Free Interest Rate		2.54	%		0.00	%

Expected Dividend Yield		0.00	%		0.00	%

Expected Life in Years		5.00			—

Expected Price Volatility		19.70	%		0.00	%

In addition to stock options, the Company also grants restricted stock awards to directors, certain officers and employees. The restricted shares awarded become fully vested after four years of continued employment or service from the date of grant. Restricted shares are forfeited if officers and employees terminate prior to the lapsing of restrictions.

The following table presents information about non-vested restricted stock awards outstanding for the year ended December 31, 2022:

	Restricted Stock Awards
	Number of shares			Weighted average grant date fair value
Balance at December 31, 2021		175,767		$	9.50
Granted		104,352			9.31
Vested		(31,652	)		10.17
Cancelled/Forfeited		—			—

Balance at December 31, 2022		248,467		$	9.33

The aggregate intrinsic value of restricted stock awards vested in calendar years 2022 and 2021, was $310 and $332, respectively.

The weighted average fair value per share of restricted stock awards granted during the years ended December 31, was $9.31 in 2022 and $9.52 in 2021.

As of December 31, 2022, there was $1,196 of total unrecognized compensation related to non-vested restricted stock awards. This cost is expected to be recognized over a weighted average period of approximately 2.8 years.

For the year ended December 31, 2022 and 2021, there was $514 and $411, respectively, of recognized compensation related to restricted stock awards.

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan (“ESPP”). Under the ESPP, the Company is authorized to issue to an eligible employee shares of common stock. There are 358,911 shares authorized under the ESPP, which include authorized but unissued shares under the 2006 Amended ESPP. The ESPP will expire on March 16, 2026.

The ESPP is implemented by participation periods of not more than twenty-seven months each. The Board of Directors determines the commencement date and duration of each participation period. An eligible employee is one who has been continually employed for at least ninety (90) days prior to commencement of a participation period. Under the terms of the ESPP, employees can choose to have up to 10 percent of their compensation withheld to purchase the Company’s common stock each participation period. The purchase price of the stock is 85 percent of the lower of the fair value on the last trading day before the Date of Participation or the fair value on the last trading day during the participation period. Approximately 40 percent of eligible employees are participating in the ESPP in the current participation period, which began November 24, 2022 and will end November 23, 2023.

Under the ESPP, at the annual stock purchase date of November 23, 2022, there were $116 in contributions, and 17,353 shares were purchased at a price of $6.68. For the year ended December 31, 2022 and 2021, there was $20 and $32, respectively, of recognized compensation related to ESPP issuances. Compensation cost is reported in salaries and employee benefits expense in the consolidated statements of income.

The total number of shares authorized, number of shares purchased and stock price have been adjusted to give retroactive effect to stock dividends and stock splits, including the 5% stock dividend declared on January 26, 2023, payable March 24, 2023, to shareholders of record as of February 28, 2023.