Note 10 - Stock Based Compensation

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

Note 10 – Stock Based Compensation

The Company's 2018 Equity Compensation Plan (the "2018 Plan") was adopted by the Board of Directors of the Company on February 20, 2018 and approved by shareholders on May 15, 2018 at the Company's 2018 Annual Meeting of Shareholders. The 2018 Plan provides for the granting of restricted stock awards, incentive and non-statutory options, and other equity-based awards to employees and directors at the discretion of the Compensation Committee of the Board of Directors. The 2018 Plan authorizes the issuance of up to 675,000 shares of common stock.

Stock Options

Accounting guidance requires that compensation cost relating to share-based payment transactions be recognized in the financial statements with measurement based upon the fair value of the equity or liability instruments issued. No stock options have been granted since 2009. Replacement stock option awards representing 40,753 shares of the Company's common stock were issued in conjunction with the HomeTown acquisition in 2019. At September 30, 2022, the Company had 4,150 outstanding and exercisable stock options remaining at an exercise price of $16.63. The outstanding options have a remaining final maturity date of December 2024 and have an aggregate intrinsic value of $64 thousand. As of September 30, 2022, there were no nonvested stock option grants and no unrecognized compensation expense. 

Restricted Stock

The Company from time-to-time grants shares of restricted stock to key employees and non-employee directors. These awards help align the interests of these employees and directors with the interests of the shareholders of the Company by providing economic value directly related to increases in the value of the Company's common stock. The value of the stock awarded is established as the fair value of the Company's common stock at the time of the grant. The Company recognizes expense, equal to the total value of such awards, ratably over the vesting period of the stock grants. The restricted stock granted cliff vests at the end of a 36-month period beginning on the date of the grant. Nonvested restricted stock activity for the nine months ended September 30, 2022 is summarized in the following table.

	Shares			Weighted Average Grant Date Value Per Share
Nonvested at December 31, 2021		58,461		$	31.91
Granted		33,073			36.10
Vested		(15,053	)		32.58
Forfeited		(747	)		33.15
Nonvested at September 30, 2022		75,734		$	33.59

As of September 30, 2022 and December 31, 2021, there was $1.4 million and $782 thousand, respectively, in unrecognized compensation cost related to nonvested restricted stock granted under the 2018 Plan. The weighted average period over which this cost is expected to be recognized is 1.55 years. The share-based compensation expense for nonvested restricted stock was $665 thousand and $534 thousand during the nine months of 2022 and 2021, respectively.

The Company offers its outside directors alternatives with respect to director compensation. For 2022, the regular quarterly board retainer will be received in the form of shares of immediately vested, but restricted stock with a market value of $10 thousand. Monthly meeting fees can be received as $800 per meeting in cash or $1,000 in immediately vested, but restricted stock. Board policy requires the directors to maintain ownership of a minimum aggregate market value of $250 thousand with respect to shares received for service on the Board. Only outside directors receive board fees. The Company issued 12,453 and 16,370 shares and recognized share based compensation expense of $449 thousand and $531 thousand during the nine months of 2022 and 2021, respectively.