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Stock-based Compensation

3 Months Ended

Mar. 31, 2022

Share-Based Payment Arrangement [Abstract]

Stock-based Compensation

Note 8. Stock-based Compensation

The Company’s stockholders approved the 2017 Equity Compensation Plan (“the Plan”) on May 23, 2017. The Plan eliminates all remaining issuable shares under previous plans and is the only outstanding plan as of March 31, 2022. The maximum number of shares of common stock or equivalents which may be issued under the Plan, is 750,000. Grants under the Plan can be in the form of stock options (qualified or non-qualified), restricted shares, restricted share units or performance units. Shares available for grant and issuance under the Plan as of March 31, 2022 are approximately 222,593. The Company intends to issue all shares under the Plan in the form of newly issued shares.

Restricted stock, options and restricted stock units typically have a three-year vesting period starting one year after the date of grant with one-third vesting each year. The options generally expire ten years from the date of grant. Restricted stock and units granted to new employees and board members may be granted with shorter vesting periods. Grants of performance units typically have a cliff vesting after three years or upon a change of control. All issuances are subject to forfeiture if the recipient leaves or is terminated prior to the awards vesting. Restricted stock have the same dividend and voting rights as common stock, while options, performance units and restricted stock units do not.

All awards are issued at the fair value of the underlying shares at the grant date. The Company expenses the cost of the awards, which is determined to be the fair market value of the awards at the date of grant, ratably over the vesting period. Forfeiture rates are not estimated but are recorded as incurred. Stock-based compensation expense for the three months ended March 31, 2022 and March 31, 2021 was $1.1 million and $1.0 million, respectively.

Activity under the Company’s options for the three months ended March 31, 2022 was as follows:

		Number of Stock Options				Weighted- Average Exercise Price				Weighted- Average Remaining Contractual Term (in years)				Aggregate Intrinsic Value
Outstanding as of December 31, 2021			23,766			$	9.94
Granted			-				-
Exercised			(8,774	)			9.09
Forfeited/cancelled/expired
Outstanding as of March 31, 2022			14,992				10.44				0.63			$	323,303
Exercisable as of March 31, 2022			14,992			$	10.44				0.63			$	323,303

The aggregate intrinsic value of outstanding and exercisable options above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on March 31, 2022 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on March 31, 2022. This amount changes based on the fair market value of the Company’s stock.

Activity under the Company’s restricted shares for the three months ended March 31, 2022 was as follows:

		Nonvested Shares				Weighted- Average Grant Date Fair Value
Nonvested as of December 31, 2021			82,693			$	21.78
Granted			32,522				32.71
Vested			(18,742	)			23.13
Forfeited/cancelled/expired			(68	)			23.23
Nonvested March 31, 2022			96,405			$	25.20

As of March 31, 2022, there was approximately $1.4 million of total unrecognized compensation cost related to nonvested restricted shares granted. The cost is expected to be recognized over a weighted average period of 1.6 years.

A summary of the status of unearned performance unit awards and the change during the period is presented in the table below:

		Units (expected)				Units (maximum)				Weighted Average Grant Date Fair Value
Unearned as of December 31, 2021			209,994							$	16.18
Awarded			34,874								32.80
Vested shares			(49,604	)							20.79
Unearned as of March 31, 2022			195,264				221,541			$	17.98

As of March 31, 2022, the specific number of shares related to performance units that were expected to vest was 195,264, determined by actual performance in consideration of the established range of the performance targets, which is consistent with the level of expense currently being recognized over the vesting period. Should this expectation change, additional compensation expense could be recorded in future periods or previously recognized expense could be reversed. As of March 31, 2022, the maximum amount of performance units that ultimately could vest if performance targets were exceeded is 221,541. During the three months ended March 31, 2022, 49,604 shares vested. A total of 27,254 shares were netted from the vested shares to satisfy employee tax obligations. The net shares issued from vesting of performance units during the three months ended March 31, 2022 were 22,350 shares. As of March 31, 2022, compensation cost of approximately $2.1 million related to non-vested performance units not yet recognized is expected to be recognized over a weighted-average period of 2.1 years.

A summary of the status of unearned restricted stock units and the changes in restricted stock units during the period is presented in the table below:

		Units (expected)				Weighted Average Grant Date Fair Value
Unearned as of December 31, 2021			136,948			$	16.52
Awarded			52,312				32.80
Vested shares			(69,584	)			16.13
Unearned as of March 31, 2022			119,676			$	23.86

Any forfeitures would result in previously recognized expense being reversed. A portion of the shares that vest will be netted out to satisfy the tax obligations of the recipient. During the three months ended March 31, 2022, 69,584 shares vested. A total of 38,201 shares were netted from the vested shares to satisfy employee tax obligations. The net shares issued from vesting of restricted stock units during the three months ended March 31, 2022 were 31,383 shares. As of March 31, 2022, compensation cost of approximately $2.4 million related to non-vested restricted stock units, not yet recognized, is expected to be recognized over a weighted-average period of 1.8 years.