Stock-Based Compensation

12 Months Ended

Dec. 31, 2023

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

Note 14 – Stock-Based Compensation

Stock-based compensation expense, reflected in earnings, for the years ended December 31, 2023, and 2022, was $90,000 and $292,000, 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.

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 no net settlements in 2023 and one net settlement in 2022.

In 2023, 10,250 stock options were granted and 8,739 shares of restricted stock were issued under the 2017 plan and 1,511 shares of restricted stock were issued under the 2022 plan. In 2022, 15,000 stock options were granted and 9,500 shares of restricted stock were issued under the 2017 plan. Stock option grant-date fair values for 2023 and 2022 were computed using the Black Scholes Merton options pricing model with the following weighted-average inputs and assumptions:

	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 (Aggregate Intrinsic Value in thousands):

	Shares Subject to Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at beginning of year		144,020		$	14.07		2.8 years		95
Granted		10,250			12.03		6.3 years		—
Exercised		—			—		—		—
Forfeited or expired		(16,770	)		14.53		2.1 years		—
Outstanding at end of year		137,500		$	13.86		2.1 years	$	—
Exercisable at year-end		109,700		$	14.23		1.4 years	$	—

Information related to stock option exercises during each year is as follows (dollars in thousands):

	2023		2022
Intrinsic value of options exercised	$	—	$	17
Cash received from options exercised	$	—	$	—
Tax benefit realized from options exercised	$	—	$	15

A summary of restricted stock activity for the year ended December 31, 2023, is presented below:

	Shares			Weighted- Average Grant Date Fair Value		Average Remaining Contractual Term
Non-vested on January 1, 2023		6,500		$	14.89		4.1 years
Granted		10,250			12.03		4.3 years
Vested		(1,300	)		14.89		3.2 years
Forfeited		(2,050	)		13.18		3.8 years
Non-vested on December 31, 2023		13,400		$	12.97		3.9 years

As of December 31, 2023, there was $67,000 and $143,000 of total unrecognized equity-based expense related to unvested stock options and restricted stock awards, respectively, granted under the equity plans that is expected to be recognized over the next 5 years as follows (dollars in thousands):

Year
2024	$	64
2025		61
2026		49
2027		29
2028		7
Totals	$	210