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Note 6 - Share-based Compensation

6 Months Ended

Jun. 30, 2021

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, 2020. 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:	2021		2020		2021		2020
Common stock grants	$	100	$	100	$	200	$	200
Stock option grants		53		54		105		113
Restricted Stock Unit Awards ("RSUs")		467		408		816		785
Total share-based compensation	$	620	$	562	$	1,121	$	1,098

The total income tax benefit recognized in the condensed consolidated statements of income for share-based compensa‐tion arrangements was approximately $200 thousand and $205 thousand for the three-month periods ended June 30, 2021 and 2020, respectively, and approximately $441 thousand and $553 thousand for the six-month periods ended June 30, 2021 and 2020, respectively.

Common stock grants

The compensation expense for common stock grants during the six-month period ended June 30, 2021, 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, 2021:

	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, 2020		94,513		$	30.22
Granted		10,716			57.34
Exercised		(6,558	)		24.77
Outstanding at June 30, 2021		98,671		$	33.53		6.32	$	2,357
Exercisable at June 30, 2021		87,955		$	30.63		5.87	$	2,356
Vested and expected to vest at June 30, 2021		98,671		$	33.53	$	6.32	$	2,357

On June 9, 2021, the Company granted options to its directors for the purchase of 10,716 shares of common stock at that day’s closing price of $57.34. 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		33.7	%
Expected dividends	None
Risk-free interest rate		0.8	%
Exercise price	$	57.34
Expected term	6.2 years
Weighted-average grant date fair value		19.60

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, 2021 and 2020, the total intrinsic value of all options exercised was approximately $164 thousand and $757 thousand, respectively, and the total amount of consideration received by the Company from the exercised options was approximately $162 thousand and $474 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, 2021 and 2020, 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, 2021:

	Restricted Stock Units			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2020		93,187		$	35.03
Awarded		48,952			49.76
Shares vested		(33,892	)		32.88
Outstanding at June 30, 2021		108,247		$	40.35

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, 2021 and 2020, 14,122 and 11,233 shares were surrendered at an average market price of $52.47 and $49.98, respectively.

As of June 30, 2021, the Company had approximately $3.7 million of unrecognized compensation expense that is expected to be recognized over a period of 2.75 years.