During 2015, the Company adopted the River Financial Corporation 2015 Equity Incentive Plan (the “2015 Equity Incentive Plan”). These Equity Incentive Plans were adopted to provide a means of enhancing and encouraging the recruitment and retention of individuals on whom the success of the Company depends.

The 2015 Equity Incentive Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock unit awards, and restricted stock awards. A total of 600,000 shares were reserved for possible issuance under the 2015 Equity Incentive Plan. The maximum term of grants under the plan is ten years and the plan expires ten years after the adoption date.

A summary of activity in the outstanding stock options for the years ended December 31, 2023 and 2022 is presented below:


	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Range of Exercise Prices
Outstanding at January 1, 2023		343,679		$	24.06		5.45
Granted		21,500			33.63
Exercised		(24,229	)		14.66
Forfeited		(600	)		27.00
Outstanding at December 31, 2023		340,350		$	25.32		5.07	$15.00 to $36.16
Exercisable at December 31, 2023		263,200		$	23.65		4.28	$15.00 to $36.16

Outstanding at January 1, 2022		367,129		$	23.14		6.03
Granted		29,500			33.47
Exercised		(29,450	)		19.47
Forfeited		(23,500	)		27.25
Outstanding at December 31, 2022		343,679		$	24.06		5.45	$12.47 to $36.16
Exercisable at December 31, 2022		246,679		$	22.03		4.60	$12.47 to $36.16

The total fair value of shares underlying the options which vested during the years ended December 31, 2023 and 2022, was $1.5 million and $2.0 million, respectively. The intrinsic value of options exercised during the years ended December 31, 2023 and 2022 was $541 thousand and $553 thousand, respectively. The aggregate intrinsic value of total options outstanding and exercisable options at December 31, 2023 was $3.98 million and $3.5 million, respectively. The aggregate intrinsic value of total options outstanding and exercisable options at December 31, 2022 was $4.88 million and $4.0 million, respectively. Cash received from options exercised for the year ended December 31, 2023 and 2022 was $354 thousand and $574 thousand, respectively. There was no income tax benefit recognized for the exercise of options for the years ended December 31, 2023 and 2022 as all options exercised were incentive stock options.

As of December 31, 2022, unvested stock options totaled 97,000. During 2023, there were 21,500 stock options that were granted and 41,350 stock options that vested resulting in unvested stock options of 77,150 as of December 31, 2023.

The stock options granted in 2023 and 2022 have a weighted average calculated value of $5.74 and $4.63, respectively. The dividend yield is the estimated dividend we expect to pay over the next four or five years. The expected life is calculated as the mid-point between the weighted-average time to vesting and the contractual maturity. The expected volatility is the approximate industry average for small bank and holding companies. The risk free interest rate is the U.S. Treasury rate on the day of the option grant for a term equal to the expected life of the option. The calculated value of each grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:


	2023			2022
Dividend yield (after three years)		1.50	%		1.50	%
Expected life in years		7			7
Expected volatility		10.00	%		10.00	%
Risk free interest rate		3.89	%		2.87	%

The Company recognized $102 thousand and $152 thousand in compensation expense related to performance share awards during 2023 and 2022, respectively. As of December 31, 2023, there was approximately $249 thousand of unrecorded compensation expense related to the performance share awards which is expected to be recognized over a weighted average period of 1.8 years.

The Company periodically grants restricted stock awards that vest upon service conditions. Dividend payments are made during the vesting period. The value of restricted stock is determined to be the current value of the Company's stock, and this total value will be recognized as compensation expense over the vesting period. The following table summarizes restricted stock activity:


	Restricted Stock
	Shares			Weighted Average Grant Date Fair Value
Year Ended December 31, 2023
Non-vested at beginning of year		65,750		$	31.55
Granted		13,000			33.47
Vested		(11,617	)		31.40
Forfeited		(1,400	)		31.20
Non-vested at end of year		65,733		$	31.96

	Restricted Stock
	Shares			Weighted Average Grant Date Fair Value
Year Ended December 31, 2022
Non-vested at beginning of year		-			-
Granted		65,750		$	31.55
Vested		-			-
Forfeited		-			-
Non-vested at end of year		65,750		$	31.55

As of December 31, 2023, there was approximately $1.7 million of total unrecognized compensation cost related to non-vested restricted stock. As of December 31, 2023, non-vested restricted stock had a weighted average remaining time to vest of 2.37 years.

The Company provides a 401(k) employee stock ownership plan, which covers substantially all of the Company’s employees who are eligible, as to age and length of service. A participant may elect to make contributions up to $22.5 thousand and $20.5 thousand of the participant’s annual compensation in 2023 and 2022. The Company makes contributions up to 3% of each participant’s annual compensation and the Company matches 50% of the next 2% contributed by the employee. Contributions to the plan by Company were approximately $869 thousand and $736 thousand in 2023 and 2022, respectively. Outstanding shares of the Company’s common stock allocated to participants at December 31, 2023 and 2022 totaled 166,664 and 154,997 respectively, and there were no unallocated shares. These shares are treated as outstanding for purposes of calculating earnings per share and dividends on these shares are included in the Consolidated Statements of Stockholders’ Equity.

The Company’s ESOP includes a put option for shares of the Company’s common stock distributed from the ESOP. Shares are distributed from the ESOP primarily to separated vested participants and certain eligible participants who elect to diversify their account balances. Since the Company’s common stock is not currently traded on an established securities market, if the owners of distributed shares desire to sell their shares, the Company is required to purchase the shares at fair value during two put option periods following the distribution of the shares from the ESOP. The first put option period is within sixty days following the distribution of the shares from the ESOP. The second put option period begins on the first day of the fifth month of the plan year for a sixty day period. The fair value of distributed shares subject to the put option totaled $0 as of December 31, 2023 and December 31, 2022. The cost of the ESOP shares totaled $4.48 million and $4.16 million as of December 31, 2023 and December 31, 2022, respectively. Due to the Company’s obligation under the put option, the distributed shares and ESOP shares are classified as temporary equity in the mezzanine section of the consolidated statements of financial condition and totaled $4.48 million and $4.16 million as of December 31, 2023 and December 31, 2022, respectively. The fair value of the ESOP shares totaled $6.17 million and $5.93 million as of December 31, 2023 and December 31, 2022, respectively.