Note 8 - Shareholders' Equity

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Equity [Text Block]

Note 8: Shareholders’ Equity

The Company grants stock options and restricted performance shares to employees in exchange for employee services, pursuant to the shareholder-approved 2019 Omnibus Equity Incentive Plan. Prior to shareholder approval of the 2019 Omnibus Equity Incentive Plan on April 25, 2019, the Company granted stock options and restricted performance shares under its 1995 Stock Option Plan, which was last amended and restated in 2012. Nonqualified stock option grants (“NQSO”) are granted with an exercise price equal to the fair market value of the related common stock on the grant date. NQSO generally become exercisable in equal annual installments over a three-year period with each installment vesting on the anniversary date of the grant. Each NQSO has a maximum ten-year term. A restricted performance share grant becomes vested after three years of being awarded, provided the Company has attained its performance goals for such three-year period.

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The following table summarizes information about stock options granted under the Plans as of December 31, 2023. The intrinsic value is calculated as the difference between the volume weighted average price as of December 31, 2023 and the exercise price of the shares. The market value as of December 29, 2023, the last day of stock market trading for the fourth quarter 2023, was $56.41 as reported by the NASDAQ Global Select Market: 

				Options Outstanding								Options Exercisable
				At December 31, 2023						For the Year Ended December 31, 2023		At December 31, 2023						For the Year Ended December 31, 2023
Range of Exercise Price				Number Outstanding		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number Exercisable		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price
				(In thousands)				(Years)				(In thousands)				(Years)
$	40	-	45		12	$	149		1.9	$	42		12	$	149		1.9	$	42
	45	-	50		-		-		-		-		-		-		-		-
	50	-	55		4		8		0.1		53		4		8		0.1		53
	55	-	60		572		-		7.6		57		213		-		6.1		58
	60	-	65		247		-		4.6		62		247		-		4.6		62
	65	-	70		138		-		6.1		66		138		-		6.1		66
$	40	-	70		973	$	157		6.5		60		614	$	157		5.4		61

The Company applies the Roll-Geske option pricing model (Modified Roll) to determine grant date fair value of stock option grants. This model modifies the Black-Scholes Model to take into account dividends and American options. During the year ended December 31, 2023, 2022 and 2021, the Company granted 225 thousand, 229 thousand, and 193 thousand stock options, respectively. The following weighted average assumptions were used in the option pricing to value stock options granted in the periods indicated:

	For the Years Ended December 31,
	2023			2022			2021
Expected volatility (1)		20	%		19	%		20	%
Expected life in years (2)		4.7			4.6			4.7
Risk-free interest rate (3)		3.60	%		1.73	%		0.46	%
Expected dividend yield		3.66	%		3.02	%		2.79	%
Fair value per award	$	8.50		$	7.90		$	7.50

⁽¹⁾ Measured using daily price changes of Company’s stock over respective expected term of the option and the implied volatility derived from the market prices of the Company’s stock and traded options.

⁽²⁾ The number of years that the Company estimates that the options will be outstanding prior to exercise.

⁽³⁾ The risk-free rate over the expected life based on the US Treasury yield curve in effect at the time of the grant.

Employee stock option grants are being expensed by the Company over the grants’ three year vesting period. The Company issues new shares upon the exercise of options. The number of shares authorized to be issued for options at December 31, 2023 is 705 thousand.

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A summary of option activity during the year ended December 31, 2023 is presented below:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term
	(In thousands)					(Years)
Outstanding at January 1, 2023		854		$	60.02
Granted		225			55.47
Exercised		(22	)		43.30
Forfeited or expired		(84	)		55.26
Outstanding at December 31, 2023		973			59.50		6.5
Exercisable at December 31, 2023		614			61.17		5.4

A summary of the Company’s nonvested option activity during the year ended December 31, 2023 is presented below:

	Shares			Weighted Average Grant Date Fair Value
	(In thousands)
Nonvested at January 1, 2023		346		$	7.88
Granted		225			8.50
Vested		(164	)		7.99
Forfeited		(48	)		8.18
Nonvested at December 31, 2023		359		$	8.18

The estimated grant date fair value for options granted under the Company’s stock option plan during the twelve months ended December 31, 2023, 2022 and 2021 was $8.50, $7.90 and $7.50 per share, respectively. The total remaining unrecognized compensation cost related to nonvested awards as of December 31, 2023 is $1,581 thousand and the weighted average period over which the cost is expected to be recognized is 1.7 years.

The total intrinsic value of options exercised during the year ended December 31, 2023, 2022 and 2021 was $113 thousand, $165 thousand and $454 thousand, respectively. The total fair value of Restricted Performance Shares (“RPSs”) that vested during the year ended December 31, 2023, 2022 and 2021 was $508 thousand, $492 thousand and $527 thousand, respectively. The total fair value of options vested during the year ended December 31, 2023, 2022 and 2021 was $1,309 thousand, $1,464 thousand and $1,783 thousand, respectively. During the year ended December 31, 2023, 22 thousand shares were issued due to the exercise of nonqualified stock options resulting in a tax deduction less than the related share based compensation expense by $16 thousand. During the year ended December 31, 2022, 40 thousand shares were issued due to the exercise of nonqualified stock options resulting in a tax deduction less than the related share based compensation expense by $143 thousand. The lesser deduction in 2022 resulted in a $30 thousand increase in tax provision. During the year ended December 31, 2021, 53 thousand shares were issued due to the exercise of nonqualified stock options resulting in a tax deduction equal to the related share based compensation expense. The lessor deductions resulting from the exercise of nonqualified stock options increased the income tax provision by $5 thousand in 2023.

A summary of the status of the Company’s restricted performance shares as of December 31, 2023 and 2022 and changes during the years ended on those dates, follows:  

	2023			2022
	(In thousands)
Outstanding at January 1,		31			30
Granted		12			12
Issued upon vesting		(9	)		(8	)
Forfeited		(2	)		(3	)
Outstanding at December 31,		32			31

As of December 31, 2023 and 2022, the restricted performance shares had a weighted-average contractual life of 1.2 years, respectively. The compensation cost that was charged against income for the Company’s restricted performance shares granted was $250 thousand, $525 thousand and $610 thousand for the year ended December 31, 2023, 2022 and 2021, respectively. There were no stock appreciation rights or incentive stock options granted in the year ended December 31, 2023, 2022 and 2021.

The Company repurchases shares of its common stock in the open market to optimize the Company’s use of equity capital and enhance shareholder value and with the intention of lessening the dilutive impact of issuing new shares under stock option plans, and other ongoing requirements. The Company repurchases and retires its common stock in accordance with Board of Directors approved share repurchase programs. The repurchase plan approved July 28, 2022 expired September 1, 2023. There is no replacement plan in place currently.

The Company’s articles of incorporation authorized two additional classes of stock of one million shares each, to be denominated “Class B Common Stock” and “Preferred Stock,” respectively, in addition to the 150 million shares of common stock presently authorized. At December 31, 2023, no shares of Class B Common Stock or Preferred Stock were outstanding.