Note 9 - Employee Benefits

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

9. EMPLOYEE BENEFITS

401(K) and Bonus and Incentive Plans

The Company maintains a 401(k) and bonus and incentive plans covering executives, managers, and employees. Excluding the 401(k), at the CEO’s discretion, funding of these plans is primarily dependent upon reaching predetermined levels of combined ratio, reduction in operating expenses, growth in direct written premium, and overall renewal retention ratios. Bonuses are earned as the Company generates earnings in excess of this required return. While some management incentive plans may be affected somewhat by other performance factors, the larger influence of corporate performance ensures that the interests of the executives, managers, and employees corresponds with those of the stakeholders.

The 401(k) plan offers a matching percentage up to 4% of eligible compensation, as well as a profit sharing percentage of each employee’s compensation. Participants are 100% vested in the matching percentage and vest at a rate of 25% per year for the profit sharing distribution. The total contribution to the 401(k) profit sharing plan was $273,851 and $272,527 for 2022 and 2021, respectively. Additionally, bonuses may be awarded to executives, managers, and associates through company incentive plans, provided certain financial or operational goals are met.

Deferred Compensation

In November 2012, the Company entered into a deferred compensation agreement with an executive of the Company. The agreement requires the Company to make payments to the executive beginning at retirement (age 62). In the event of separation of service without cause prior to age 62, benefits under this agreement vest 25% in November 2017, 50% in November 2022, 75% in November 2027, and 100% on January 1, 2032. In the event of death prior to retirement, benefits become fully vested and are payable to the executive’s beneficiaries. Using a discount rate of 3.6%, the fully vested obligation under the agreement would total approximately $1,689,467 on January 1, 2032. As of December 31, 2022 and 2021, the accrued liability related to this agreement totaled $486,387 and $529,117, respectively. The Company recognized $(42,731) and $58,671 of (benefit)/expense in 2022 and 2021, respectively.

ESOP

In connection with our conversion and public offering, we established an ESOP. The ESOP borrowed from the Company to purchase 350,000 shares in the offering. The issuance of the shares to the ESOP resulted in a contra account established in the equity section of the balance sheet for the unallocated shares at an amount equal to their $10.00 per share purchase price.

The Company may make discretionary contributions to the ESOP and pay dividends on unallocated shares to the ESOP. The ESOP uses funds it receives to repay the loan. When loan payments are made, ESOP shares are allocated to participants based on relative compensation and expense is recorded. A compensation expense charge is booked monthly during each year for the shares committed to be allocated to participants that year, determined with reference to the fair market value of our stock at the time the commitment to allocate the shares is accrued and recognized. For the year ended December 31, 2022, we recognized compensation expense of $476,482 related to 23,437 shares of our common stock that were committed to be released to participants’ accounts for the year ended December 31, 2022. For the year ended December 31, 2021, we recognized compensation expense of $375,097 related to 23,437 shares of our common stock that were committed to be released to participants’ accounts for the year ended December 31, 2021.

Restricted Stock Units

RSUs were granted for the first time in February 2018 and more recently in April of each year. RSUs have a grant date value equal to the closing price of the Company stock on the dates the shares are granted. The RSUs vest one third over three years beginning the first anniversary of the date of grant. the Company recognized $205,403 and $186,897 in RSU expense as of December 31, 2022 and 2021, respectively.

	RSUs			Weighted Average Grant Date Fair Value
Nonvested at December 31, 2021	$	259,059		$	13.30
Granted		219,945			17.05
Vested		(205,403	)		13.71
Nonvested at December 31, 2022	$	273,601		$	15.72