Stock Options

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

In 2020, the Company adopted the 2020 Equity Incentive Plan which replaced the 2014 Equity Incentive Plan that did not have any remaining shares available for issuance. The plans are designed to help the Company attract, retain, and motivate employees and non-employee directors. Incentive stock options, non-qualified stock options, restricted stock, restricted stock units, and other equity-based awards may be granted as part of the plan.

As of January 1, 2023, the Company had a total of 914,000 stock options outstanding. During the nine months ended as of September 30, 2023, the Company issued 89,000 stock options with a strike price of $27.77 to a group of employees. The options granted in 2023 all expire ten years from the grant date. Of the 89,000 grants awarded in 2023, 59,500 of the options vest in three years while the 29,500 remaining options vest in five years.

Stock options outstanding as of September 30, 2023 are presented below:


Stock Options Granted
Date	Shares	Forfeited	Cash Settlement	Outstanding	Strike Price		Vesting Period	Expiration

January 20, 2023	59,500	—	—	59,500	$	27.77	3 years	10 years
January 20, 2023	29,500	—	—	29,500	27.77		5 years	10 years
January 18, 2022	156,000	—	—	156,000	24.10		3 years	10 years
January 18, 2022	78,000	—	—	78,000	24.10		5 years	10 years
April 9, 2021	156,500	—	—	156,500	24.23		3 years	10 years
April 9, 2021	78,000	—	—	78,000	24.23		5 years	10 years
March 11, 2020	119,300	—	—	119,300	25.34		3 years	10 years
March 11, 2020	119,200	—	—	119,200	25.34		5 years	10 years
March 15, 2019	120,900	(19,800)	—	101,100	28.01		3 years	10 years
March 15, 2019	119,100	(19,200)	—	99,900	28.01		5 years	10 years






August 27, 2015	58,125	(26,250)	(28,875)	3,000	28.02		5 years	10 years

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


	September 30, 2023
	Shares	Weighted Average Exercise Price
Outstanding, beginning of year	914,000	$	25.34
Granted	89,000	27.77

Forfeited	(3,000)	28.01
Expired	—	—
Outstanding, end of period	1,000,000	$	25.55

Exercisable, end of period	223,400	$	26.58

The estimated fair value of options, including the effect of estimated forfeitures, is recognized as expense on a straight line basis over the options’ vesting periods while ensuring that the cumulative amount of compensation cost recognized at least equals the value of the vested portion of the award at that date.

The fair value of stock options is estimated using the Black-Scholes option pricing model. The following is a summary of the assumptions used in this model for stock options granted for the nine months ended September 30, 2023:


	Nine months ended September 30,
	2023
Risk-free interest rate	3.76		%
Expected volatility	31		%
Expected Annual dividend	$	1.28
Expected life	6.84 years
Weighted average grant date fair value per option	$	6.11

Compensation expense for stock options is recognized using the fair value when the stock options are granted and is amortized over the options' vesting period. Compensation expense related to stock options was $229,000 and $715,000 for the three and nine months ended September 30, 2023 compared to $236,000 and $1,004,000 for the same periods of 2022. As of September 30, 2023, a total of 223,400 stock options were exercisable and the weighted average years to expiration of these options was 5.94 years. Total unrecognized compensation cost for non-vested options was $1,437,000 and will be recognized over their weighted average remaining vesting period of 1.08 years.