Stock-Based Compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

Compensation cost is recognized for stock options and restricted stock awards issued to employees. Compensation cost is measured as the fair value of these awards on their date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used as the fair value of restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period for stock option awards and as the restriction period for restricted stock awards. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.

The expense recognition of employee stock option and restricted stock awards resulted in net expense of approximately $1.4 million and $1.0 million during the years ended December 31, 2021 and 2020, respectively.

Stock options:

The Company currently has two incentive compensation plans with outstanding stock options, the 2002 Stock Option Plan and the 2017 Stock and Incentive Compensation Plan (“the Plan”). Only the Plan, which authorizes the use of stock options, stock appreciation rights, restricted stock and/or restricted stock, is available to grant options and shares to employees and directors. At inception the Plan allowed for up to 1,120,000 shares of common stock to be issued. In 2021, an additional 900,000 shares were authorized for a total of 2,020,000. As of December 31, 2021, there are 883,381 shares available for future grant. Shares of common stock related to any unexercised or unvested award granted under the Plan that terminate or expire, or are subsequently forfeited or cancelled for any reason, become available for re-grant under the Plan. Option prices are equal to or greater than the estimated fair value of the common stock at the date of grant. Options outstanding vest over a four-year period, whereby 25% of the options become exercisable on each anniversary of the grant date.

Information with respect to options outstanding during the years ended December 31, 2021 and 2020 is as follows:



	2021			2020
	Shares	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
Outstanding at beginning of year	1,169,413	$	12.21	1,308,047	$	11.00
Add: Granted	170,244	24.51		205,100	13.95
Less: Exercised	(186,461)	9.61		(142,901)	7.72
Less: Retired on exercise	(54,192)	9.41		(137,334)	7.90
Less: Expired/cancelled/forfeited	(38,981)	7.43		(63,499)	11.60
Outstanding at end of year	1,060,023	$	14.77	1,169,413	$	12.21
Exercisable at end of year	551,804	$	12.55	567,593	$	11.13

The weighted average fair value of options granted during the years ended December 31, 2021 and 2020, was $12.56 and $7.37, respectively.

Note 15 - Stock-Based Compensation (continued)

A summary of information about stock options outstanding is as follows:



	Exercise Price Range	Weighted Average Exercise Price		Average Remaining Life (years)	Outstanding Shares		Exercisable Shares
December 31, 2021

	$10.70 - 14.63	$	12.89	2.45	892,529		546,804
	14.64 - 18.56	14.96		3.14	22,750		5,000
	18.57 - 22.49	21.86		4.71	2,500		—
	22.50 - 26.41	26.41		5.00	142,244		—











Total outstanding options		$	14.77	2.80	1,060,023		551,804
Intrinsic value on December 31, 2021					$	12,143,007	$	7,529,711

December 31, 2020
	$8.50 - 12.38	$	11.03	2.25	740,513		508,379
	12.39 - 14.38	13.86		4.89	189,100		3,500
	14.39 - 14.89	14.57		4.00	239,800		55,714








Total outstanding options		$	12.21	3.00	1,169,413		567,593
Intrinsic value on December 31, 2020					$	2,164,598	$	1,620,892

The aggregate intrinsic value as presented in the preceding tables is the difference between the estimated fair value of the stock as of December 31, 2021 and 2020, and the exercise price of the option multiplied by the number of options outstanding. Stock options with exercise prices greater than the estimated fair value of the stock are not included in this calculation.

Total unrecognized compensation expense related to stock options to be recognized over the next five years was $2.9 million and $2.2 million at December 31, 2021 and 2020, respectively.

The intrinsic value of stock options exercised was $4.0 million and $887.7 thousand during the years ended December 31, 2021 and 2020, respectively.

The weighted average fair value of options granted during 2021 and 2020 were estimated using the Black-Scholes option-pricing model with the following weighted average assumptions:



	2021	2020
Dividend yield	0.80%	0.00%
Risk free interest rate	0.25%	0.43%
Expected volatility	60.97%	64.46%
Expected life in years	5	5

Restricted stock:

The Company from time-to-time also grants shares of restricted stock to key employees. These awards help align the interests of these employees with the interests of the stockholders of the Company by providing economic value directly related to increases in the value of the Company’s stock. These awards typically hold service requirements over various vesting periods. The value of the stock awarded is established as the fair market value of the 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.

Note 15 - Stock-Based Compensation (continued)

All restricted stock agreements are conditioned upon continued employment. Termination of employment prior to a vesting date, as described below, would terminate any interest in non-vested shares. All restricted shares will fully vest in the event of change in control of the Company.

Nonvested restricted stock for the years ended December 31, 2021 and 2020 is summarized in the following table.



	2021			2020
	Shares	Weighted Average Grant-Date Fair Value		Shares	Weighted Average Grant-Date Fair Value
Nonvested at beginning of year	30,713	$	13.46	19,500	$	12.38
Add: Granted	29,405	14.88		16,713	14.36
Less: Vested	(11,071)	13.38		(5,500)	12.38
Less: Forfeited	—	—		—	—
Nonvested at end of year	49,047	$	14.33	30,713	$	13.46

The vesting schedule of restricted shares as of December 31, 2021 is as follows:



Year						Shares
2022						20,874
2023						18,374
2024						9,799

						49,047

There was $189 thousand and $121 thousand of total unrecognized compensation expense related to nonvested restricted stock at December 31, 2021 and 2020, respectively.