Note 7 - Share-based Compensation

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

(7) Share-Based Compensation

Share-based compensation is measured at the grant date based on the fair value of the award and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant).

The Company issues share-based awards through several plans that are described in detail in the notes to the consolidated financial statements for the year ended December 31, 2021.  The compensation cost charged against income for those plans is included in selling, general & administrative expenses as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
Share-based compensation related to:	2022		2021		2022		2021
Common stock grants	$	100	$	100	$	200	$	200
Stock option grants		60		53		113		105
Restricted Stock Unit Awards ("RSUs")		621		467		1,160		816
Total share-based compensation	$	781	$	620	$	1,473	$	1,121

The total income tax benefit recognized in the condensed consolidated statements of income for share-based compensa‐tion arrangements was approximately $236 thousand and $200 thousand for the three-month periods ended June 30, 2022 and 2021, respectively, and approximately $617 thousand and $441 thousand for the six-month periods ended June 30, 2022 and 2021, respectively.

Common stock grants

The compensation expense for common stock grants during the six-month period ended June 30, 2022, was determined based on an approved fixed dollar amount with the number of shares to be determined on the date of issuance.

Stock Option grants

The following is a summary of stock option activity under all plans for the six-month period ended June 30, 2022:

	Shares Under Options			Weighted Average Exercise Price (per share)		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2021		98,671		$	33.53
Granted		9,876			77.28
Exercised		(1,295	)		16.32
Outstanding at June 30, 2022		107,252		$	37.77		5.81	$	4,483
Exercisable at June 30, 2022		97,376		$	33.76		5.39	$	4,461
Vested and expected to vest at June 30, 2022		107,252		$	37.77	$	5.81	$	4,483

On June 8, 2022, the Company granted options to its directors for the purchase of 9,876 shares of the Company’s common stock at that day’s closing price of $77.28.  The compensation expense related to these grants was determined as the fair value of the options using the Black-Scholes option pricing model based on the following assumptions:

Expected volatility	34.7%
Expected dividends	None
Risk-free interest rate	2.9%
Exercise price	$77.28
Expected term (in years)	6.2
Weighted-average grant date fair value	$30.37

The stock volatility for each grant is determined based on a review of the experience of the weighted average of historical daily price changes of the Company’s common stock over the expected option term, and the risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods correspond‐ing with the expected term of the option.  The expected term is estimated based on historical option exercise activity.

During the six-month periods ended June 30, 2022 and 2021, the total intrinsic value of all options exercised was approximately $72 thousand and $164 thousand, respectively, and the total amount of consideration received by the Company from the exercised options was approximately $21 thousand and $162 thousand, respectively.  At its discretion, the Company allows option holders to surrender previously owned common stock in lieu of paying the exercise price and withholding taxes.  During both the six-month periods ended June 30, 2022 and 2021, no shares were surrendered for this purpose.

Restricted Stock Unit awards

The following table summarizes information about RSU activity during the six-month period ended June 30, 2022:

	Restricted Stock Units			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2021		101,168		$	41.78
Awarded		51,981			74.94
Shares vested		(49,575	)		41.05
Shares forfeited		(21	)		74.75
Outstanding at June 30, 2022		103,553		$	53.59

At the Company’s discretion, upon vesting, RSU holders are given the option to net-share settle to cover the required minimum withholding tax and the remaining amount is converted into the equivalent number of common shares and issued to the RSU holder.  During the six-month periods ended June 30, 2022 and 2021, 19,425 and 14,122 shares were surrendered at an average market price of $67.05 and $52.47, respectively.

As of June 30, 2022, the Company had approximately $4.7 million of unrecognized compensation expense that is expected to be recognized over a period of 2.8 years.