The Company adopted the 2023 Stock Incentive Plan (“2023 Plan”) following shareholder approval of the 2023 Plan at the 2023 Annual Meeting. Subsequent to the adoption of the 2023 Plan, no additional grants may be issued under the prior plans. The 2023 Plan provides for grants of up to 325,000 shares, which includes any shares subject to stock awards under the Company's previous stock incentive plans.

Stock Options: Under the 2020 Stock Incentive Plan and previous plans, certain key employees have been granted the option to purchase set amounts of common stock at the market price on the day the option was granted. Optionees, at their own discretion, may pay cash to cover the cost of exercise, may cover the cost of exercise through the exchange at the then fair value of already owned shares of the Company’s stock, or they may cover the cost of exercise through net settlement of a portion of the stock options exercised in satisfaction of the exercise price and applicable tax withholding requirements. The two latter options are referred to as cashless stock option exercises. Options are granted for a 10-year period and vest on a pro-rata basis over the initial three years from the grant date.

The Company measures the fair value of each stock option at the date of grant using the Black-Scholes option pricing model using assumptions noted in the following table. Expected volatility is based on the historical volatility of the price of the Company’s common stock. The Company uses historical data to estimate option exercise and stock option forfeiture rates within the valuation model. The expected term of options granted is determined based on historical experience with similar options and represents the period of time that options granted are expected to be outstanding. The expected dividend yield is based on dividend trends and the market value of the Company’s common stock at the time of grant. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

The following assumptions were used to determine the fair value of stock options as of the grant date to determine compensation expense for the years ended December 31, 2023, 2022, and 2021:

Stock Options:

2023

2022

2021

Grant date fair value

$10.27

Expected life of options

8 years

Risk-free interest rate

1.33

Dividend yield rate

3.86

Price volatility

36.46


	Number of Shares	Weighted Average Exercise Price	Weighted Average Remaining Contractual Life, in Years


Outstanding at January 1, 2023	120,195	$34.21
Granted	—	—
Forfeited	—	—
Exercised	(15,585)	28.54
Outstanding at December 31, 2023	104,610	$35.06	5.05

At December 31, 2023, 2022, and 2021, there were 100,830, 106,714, and 107,553 options exercisable, with weighted average exercise prices of $34.80, $33.78, and $32.63, respectively.

The aggregate intrinsic value of the stock options is the total pretax intrinsic value (i.e., the difference between the Company’s closing stock price on December 31, 2023 and the exercise price, times the number of shares) that would have been received by the option holders had all the option holders exercised their options on December 31, 2023. This amount changes based on the fair value of the Company’s stock. The total intrinsic value of options outstanding and exercisable as of December 31, 2023, 2022, and 2021 was $2.3 million, $2.2 million, and $1.2 million, respectively. The total intrinsic value of options exercised for the years ended December 31, 2023, 2022, and 2021 was $355,000, $307,000, and $969,000, respectively.

As noted above, the Company allows stock options to be exercised through cash or cashless transactions. In each of 2023, 2022, and 2021 the Company received no cash for cash stock option exercises. In 2023, 2022, and 2021 the Company net settled $445,000, $475,000, and $1.4 million respectively, for cashless stock option exercises. The Company withheld $534,000, $559,000, and $1.7 million to pay for stock option exercises or income taxes that resulted from the exercise of stock options in 2023, 2022, and 2021, respectively.

For the years ended December 31, 2023, 2022 and 2021, the Company recognized $74,000, $108,000, and $173,000, respectively, in stock option compensation expense. As of December 31, 2023, there was approximately $36,000 of total unrecognized compensation expense related to non-vested options, which is expected to be recognized over the weighted-average vesting period of 0.9 years.

Restricted Stock Units: Under the 2023 Plan, the Company grants restricted stock units to certain key employees periodically. Recipients of restricted stock units do not pay any cash consideration to the Company for the shares and receive all dividends with respect to such shares when the shares vest. Restricted stock units cliff vest at the end of a three-year time period.


	Number of Shares	Weighted Average Grant Date Fair Value	Weighted Average Remaining Contractual Life, in Years


Outstanding at January 1, 2023	38,502	$34.12
Granted	25,280	45.43
Dividend equivalents awarded	2,826	—
Vested	(21,677)	28.26
Forfeited	(1,903)	37.53
Outstanding at December 31, 2023	43,028	$41.32	1.98

The total intrinsic value of restricted stock units vested for the years ended December 31, 2023, 2022, and 2021 was $1.1 million, $1.1 million, and $1.3 million, respectively.

For the years ended December 31, 2023, 2022 and 2021, the Company recognized $751,000, $634,000, and $900,000, respectively, in restricted stock unit compensation expense. As of December 31, 2023, there was approximately $955,000 of total unrecognized compensation expense related to non-vested options, which is expected to be recognized over the weighted-average vesting period of 2.0 years.

Performance Stock Units: Under the 2023 Plan and previous plans, the Company grants performance stock units to certain key employees periodically. Recipients of performance stock units do not pay any cash consideration to the Company for the shares and receive all dividends with respect to such shares when the shares vest. Performance stock units cliff vest at the end of a three-year time period if the performance criteria are met.


	Number of Shares	Weighted Average Grant Date Fair Value	Weighted Average Remaining Contractual Life, in Years


Outstanding at January 1, 2023	—	$—
Granted	9,453	45.43
Dividend equivalents awarded	393	—
Vested	—	—
Forfeited	—	—
Outstanding at December 31, 2023	9,846	$43.62	2.23

The Company recognized $111,000 for the year ended December 31, 2023 in performance stock unit compensation expense and zero for the years ended December 31, 2022 and 2021. As of December 31, 2023, there was approximately $318,000 of total unrecognized compensation expense related to non-vested options, which is expected to be recognized over the weighted-average vesting period of 2.2 years.