Note 7 - Stock-based Compensation

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

7. STOCK-BASED COMPENSATION

In May 2022, the Company’s shareholders approved the 2022 Equity Incentive Plan (the “2022 Plan”), which provides for the grant of up to 576,550 shares of common stock, including 126,550 shares that remained available for grant under the 2013 Stock Option Plan when the 2022 Plan was adopted. The 2022 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards. The frequency, amount and terms of stock-based awards may be determined by the Board of Directors or its compensation committee, consistent with the terms and purposes of the 2022 plan.

In May 2013, the Company established the 2013 Stock Option Plan for which 141,752 shares of common stock are reserved. With the establishment of the Company’s 2022 Equity Incentive Plan, no further options may be issued under the 2013 Stock Option Plan, though options previously granted continue to be outstanding and governed by the plan.

107,200 options were granted under the 2022 Plan during the three months ended March 31, 2024. The fair value of each option was estimated on the date of grant using the following assumptions.

	2024
Expected life of stock options (in years)		6.2
Risk free interest rate		3.98	%
Annualized Volatility		32.3	%
Dividend yields		3.17	%
Weighted-average fair value of options granted during the three months ended March 31, 2024	$	9.25

No options were granted during 2023.

A summary of the activity within the 2013 Plan follows: 

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term in Years		Intrinsic Value
Options outstanding at January 1, 2023		189,917		$	21.14
Options exercised		(24,400	)		18.59
Options outstanding at December 31, 2023		165,517		$	21.52
Options exercised		(23,765	)		15.06
Options outstanding at March 31, 2024		141,752		$	22.60		3.0	$	2,011,461
Options exercisable at March 31, 2024		141,752		$	22.60		3.0	$	2,011,461

A summary of the activity within the 2022 Plan follows: 

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term in Years		Intrinsic Value
Options outstanding at January 1, 2023		117,200		$	31.00
Options cancelled		(10,400	)		31.00
Options exercised		(1,300	)		31.00
Options outstanding at December 31, 2023		105,500		$	31.00
Options granted		107,200			34.07
Options exercised		(1,300	)		31.00
Options outstanding at March 31, 2024		211,400		$	32.56		8.96	$	894,902
Options exercisable at March 31, 2024		21,800		$	31.00		7.93	$	126,222
Expected to vest after March 31, 2024		163,397		$	32.56		9.08	$	691,696

As of March 31, 2024, there was $1.7 million of total unrecognized compensation cost related to non-vested stock options, share-based compensation under the 2022 plan. That cost is expected to be recognized over a weighted average period of 4.2 years.  There were no unrecognized costs remaining under the 2013 plan as of March 31, 2024.

The total fair value of options vested during the three months ended March 31, 2024, and 2023 was $199,000 and $7,000, respectively. The total intrinsic value of options at time of exercise was $532,000 and $331,000 for the three months ended March 31, 2024, and 2023, respectively.

Compensation cost related to stock options recognized in operating results under the stock option plans was $88,000 and $87,000 for the three months ended March 31, 2024, and 2023, respectively. The associated income tax benefit recognized was $7,000 for the three months ended March 31, 2024, and 2023, respectively.

Cash received from option exercises under the plans for the three months ended March 31, 2024, and 2023 was $359,000 and $137,000, respectively. The tax benefit realized for the tax deductions from option exercise totaled $69,000 and $49,000 for the three months ended March 31, 2024, and 2023, respectively.

During the three months ended March 31, 2024, the Company granted 3,033 restricted stock units with a fair value of $34.07 per share and a one-year vesting period. Compensation costs related to these units during the three months ended March 31, 2024 were $12,000. As of March 31, 2024, there was $92,000 of total unrecognized compensation cost related to restricted stock units. That cost is expected to be recognized over a weighted average period of 0.9 years.

During 2022, the Company granted 1,650 shares of restricted stock with a fair value of $31 per share and a one-year vesting period. Compensation costs related to these shares during the three months ended March 31, 2023 totaled $12,000. As of March 31, 2024, there was no unrecognized compensation cost related to restricted stock.