Stock-Based Compensation

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

Note 14 – Stock-Based Compensation

Stock-based expense, net of forfeitures for the nine months ended September 30, 2023, and September 30, 2022, was $96,000 and $274,000, respectively.

The Company accounts for forfeitures when they occur by reversing any previously accrued compensation expense on forfeited options in accordance with ASC 718, Compensation – Stock Compensation.

On November 17, 2017, the stockholders approved the adoption of the 2017 Equity Incentive Plan (“2017 Plan”). The 2017 Plan provides for the grant of a maximum of 263,127 shares of the Company’s common stock of which up to 187,948 shares of common stock may be granted for stock options and 75,179 shares of common stock may be issued as restricted stock to Directors and employees of the Company. Stock options and restricted stock awards currently issued under the 2017 Plan vest at 20% per year beginning on the first anniversary of date of grant and the options expire seven years after the grant date.

On May 25, 2022, the stockholders approved the adoption of the 2022 Equity Incentive Plan (“2022 Plan”). The 2022 Plan provides for the grant of a maximum of 252,340 shares of the Company’s common stock of which up to 168,227 shares of common stock may be issued as restricted stock and 84,113 shares of common stock may be granted for stock options to Directors and employees of the Company. The Board of Director’s compensation committee specifies the vesting schedules for the restricted stock and options. Option expiration dates are flexible as well but cannot exceed ten years from the grant date. No restricted stock or stock options have been granted under the 2022 plan.

The stock option plans allow for net settlement of vested options. In a net settlement, the Company, at the direction of the optionee, net settles the options by issuing new shares to the optionee with a value, at the current per share trading price, equal to the total in-the-money or intrinsic value of the options less any necessary tax withholdings on the disqualifying disposition of Incentive Stock Options. The optionee is granted newly issued shares and a small amount of cash in lieu of partial shares. There were zero net settlements in the nine months ended September 30, 2023. There was one net settlement in the nine months ended September 30, 2022.

For the nine months ended September 30, 2023, 10,250 stock options were granted and 10,250 shares of restricted stock were issued. In the nine months ended September 30, 2022, 15,000 stock options were granted and 9,500 shares of restricted stock were issued. Stock option grant-date fair values for 2022 and 2023 were computed using the Black Scholes Merton options pricing model with the following weighted-average inputs and assumptions:

	September 30,			September 30,
	2023			2022
Grant date stock price and exercise price	$	12.03		$	15.80
Dividend yield		2.89	%		2.48	%
Expected stock price volatility		23.37	%		23.59	%
Risk-free interest rate		3.50	%		2.17	%
Expected option life in years		6			6
Total weighted-average fair value of options granted	$	2.42		$	3.00

Historical data is used to estimate expected volatility and the term of options expected to be outstanding and takes into account that options are not transferable. The risk-free interest rate is based on the U.S. Treasury yield curve for the expected term in effect at the date of grant.

A summary of stock option activity in 2023 is presented below (Intrinsic Value in 000s):

						Weighted-
				Weighted-		Average
	Shares			Average		Remaining		Aggregate
	Subject to			Exercise		Contractual		Intrinsic
	Options			Price		Term		Value
Outstanding at June 30, 2023		145,750		$	14.08		2.5 Years	$	29
Granted		—			—		—		—
Exercised		—			—		—		—
Forfeited or expired		(1,250	)	$	12.03		4.5 Years		—
Outstanding at September 30, 2023		144,500		$	13.91		2.4 Years	$	—
Exerciseable at September 30, 2023		111,700		$	14.46		1.5 Years	$	—

						Weighted-
				Weighted-		Average
	Shares			Average		Remaining		Aggregate
	Subject to			Exercise		Contractual		Intrinsic
	Options			Price		Term		Value
Outstanding at December 31, 2022		144,020		$	14.07		2.8 Years	$	95
Granted		10,250			12.03		6.8 years		—
Exercised		—			—		—		—
Forfeited or expired		(9,770	)	$	14.26		2.5 Years		—
Outstanding at September 30, 2023		144,500		$	13.91		2.4 Years	$	—
Exerciseable at September 30, 2023		111,700		$	14.46		1.5 Years	$	—

A summary of stock option activity in 2022 is presented below (Intrinsic Value in 000s):

						Weighted-
				Weighted-		Average
	Shares			Average		Remaining		Aggregate
	Subject to			Exercise		Contractual		Intrinsic
	Options			Price		Term		Value
Outstanding at June 30, 2022		156,820		$	13.94		3.1 Years	$	123
Granted		—			—		—		—
Exercised		—			—		—		—
Forfeited or expired		(4,200	)		14.63		3.6 Years		—
Outstanding at September 30, 2022		152,620		$	14.07		2.9 Years	$	125
Exerciseable at September 30, 2022		118,020		$	14.45		2.2 Years	$	56
						Weighted-
				Weighted-		Average
	Shares			Average		Remaining		Aggregate
	Subject to			Exercise		Contractual		Intrinsic
	Options			Price		Term		Value
Outstanding at December 31, 2021		163,600		$	13.94		3.6 Years	$	118
Granted		15,000			15.80		6.5 Years		—
Exercised		(13,200	)		14.90		—		17
Forfeited or expired		(12,780	)		13.57		4.3 Years		—
Outstanding at September 30, 2022		152,620		$	14.07		2.9 Years	$	125
Exerciseable at September 30, 2022		118,020		$	14.45		2.2 Years	$	56

No stock options were exercised in the three or nine months ending September 30, 2023. No stock options were exercised during the three months ending September 30, 2022. During the nine months ending September 30, 2022, stock options totaling 13,200 shares were exercised with a weighted average exercise price of $14.90 and an intrinsic value of $17,000.

A summary of restricted stock activity for the three and nine months ended September 30, 2023, is presented below:

				Weighted-		Average
				Average		Remaining
				Grant Date		Contractual
	Shares			Fair Value		Term
Non-vested on June 30, 2023		15,450		$	12.99	4.4 Years
Granted		—			—
Vested		—			—
Forfeited		(1,250	)		12.03	4.5 years
Non-vested on September 30, 2023		14,200		$	13.08	4.1 years
				Weighted-		Average
				Average		Remaining
				Grant Date		Contractual
	Shares			Fair Value		Term
Non-vested on December 31, 2022		6,500		$	14.89	4.1 years
Granted		10,250			12.03	4.5 years
Vested		(1,300	)		14.89	3.6 years
Forfeited		(1,250	)		12.03	4.5 years
Non-vested on September 30, 2023		14,200		$	13.08	4.1 years

A summary of restricted stock activity for the three and nine months ended September 30, 2022, is presented below:

				Weighted-		Average
				Average		Remaining
				Grant Date		Contractual
	Shares			Fair Value		Term
Non-vested on June 30, 2022		18,750		$	14.02	2.9 years
Granted		—			—
Vested		(500	)		12.24	3.8 years
Forfeited		—			—
Non-vested on September 30, 2022		18,250		$	14.61	2.6 Years
				Weighted-		Average
				Average		Remaining
				Grant Date		Contractual
	Shares			Fair Value		Term
Non-vested on December 31, 2021		12,774		$	14.02	2.0 years
Granted		9,500			14.92	4.6 years
Vested		(585	)		14.75	3.3 years
Forfeited		(3,439	)		12.59	2.9 years
Non-vested on September 30, 2022		18,250		$	14.61	2.6 Years

As of September 30, 2023 there was $73,000 and $163,000 of total unrecognized equity-based expense related to unvested stock options and restricted stock awards, respectively, granted under the 2017 Equity Incentive Plan that is expected to be recognized over the next 5 years as follows (dollars in thousands):

Year
2023	$	17
2024		67
2025		64
2026		52
2027		30
2028		6
Totals	$	236