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Note 6 - Share-based Compensation

6 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Text Block]

(6) 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, 2019. 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:	2020		2019		2020		2019
Common stock grants	$	100	$	100	$	200	$	200
Stock option grants		54		24		113		32
Restricted Stock Unit Awards ("RSUs")		408		277		785		464
Total share-based compensation	$	562	$	401	$	1,098	$	696

The total income tax benefit recognized in the condensed consolidated statements of income for share-based compensation arrangements was approximately $205 thousand and $188 thousand for the three-month periods ended June 30, 2020 and 2019, respectively, and approximately $553 and $348 thousand for the six-month periods ended June 30, 2020 and 2019, respectively.

The following is a summary of stock option activity under all plans for the six-month period ended June 30, 2020:

	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, 2019		105,614		$	25.34
Granted		14,892			43.95
Exercised		(25,993	)		18.24
Outstanding at June 30, 2020		94,513		$	30.22		6.53	$	1,308
Exercisable at June 30, 2020		75,871		$	27.60		6.06	$	1,249
Vested and expected to vest at June 30, 2020		94,513		$	30.22		6.53	$	1,308

On June 10, 2020, the Company granted options to its directors for the purchase of 14,892 shares of common stock at that day’s closing price of $43.95. 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		32.8%
Expected dividends		None
Risk-free interest rate		0.3%
Exercise price	$	43.95
Expected term (in years)		6.1
Weighted-average grant date fair value		14.10

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 corresponding 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, 2020 and 2019, the total intrinsic value of all options exercised (i.e., the difference between the market price on the exercise date and the price paid by the employees to exercise the options) was approximately $757 thousand and $628 thousand, respectively, and the total amount of consideration received by the Company from the exercised options was approximately $474 thousand and $440 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, 2020 and 2019, no shares were surrendered for this purpose.

On February 24, 2020, the Company’s Compensation Committee approved the award of $400 thousand, payable in shares of common stock to the Company’s Chairman, Chief Executive Officer, and President under the 2003 Incentive Plan. Subject to his continued employment and the terms of his employment agreement, the shares will be issued in December 2020.

The following table summarizes information about RSU activity during the six-month period ended June 30, 2020:

	Restricted Stock Units			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2019		113,866		$	28.36
Awarded		47,509			49.36
Shares vested		(33,815	)		28.93
Outstanding at June 30, 2020		127,560		$	33.78

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, 2020 and 2019, 11,233 and 8,132 shares were surrendered at an average market price of $49.98 and $33.35, respectively.

As of June 30, 2020, the Company had approximately $4.0 million of unrecognized compensation expense that is expected to be recognized over a period of 3.75 years.