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Note 15 - Stock Based Compensation

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

Note 15 - Stock Based Compensation

Options to buy stock have been granted to key employees to provide them with additional equity interests in ChoiceOne. Compensation expense in connection with stock options granted was $4,000 in 2022 and $15,000 in 2021. The Stock Incentive Plan of 2022 was approved by the Company’s shareholders at the Annual Meeting held on May 25, 2022. The Stock Incentive Plan of 2022 provides for the issuance of up to 200,000 shares of common stock. At December 31, 2022, there were 200,000 shares available for future grants.

A summary of stock options activity during the year ended December 31, 2022 was as follows:

						Weighted				Weighted
						average				average
						exercise				Grant Date
		Shares				price				Fair Value

Options outstanding at January 1, 2022			20,631			$	25.30			$	3.46
Options granted			-				-				-
Options exercised			-				-				-
Options forfeited or expired			-				-				-
Options outstanding, end of year			20,631			$	25.30			$	3.46

Options exercisable at December 31, 2022			20,631			$	25.30			$	3.46

The exercise prices for options outstanding and exercisable at the end of 2022 ranged from $20.86 to $27.25 per share. The weighted average remaining contractual life of options outstanding and exercisable at the end of 2022 was approximately 5.57 years.

The intrinsic value of all outstanding stock options and exercisable stock options was $76,000 and $34,000 respectively, at December 31, 2022 and December 31, 2021. The aggregate intrinsic values of outstanding and exercisable options at December 31, 2022 were calculated based on the closing market price of the Company’s common stock on December 31, 2022 of $29.00 per share less the exercise price.

Information pertaining to options outstanding at December 31, 2022 was as follows:

Exercise price of stock options:				Number of options outstanding at year-end				Number of options exercisable at year-end				Average remaining contractual life (in years)
$	27.25				12,000				12,000				6.42
$	25.65				3,000				3,000				5.50
$	20.86				3,306				3,306				4.35
$	21.13				2,325				2,325				3.00

The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model. ChoiceOne uses historical data to estimate the volatility of the market price of ChoiceOne stock and employee terminations within the valuation model. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. As of December 31, 2022, there was no unrecognized compensation expense related to stock options.

ChoiceOne has granted restricted stock units to a select group of employees under the Stock Incentive Plan of 2012. Restricted stock units outstanding as of December 31, 2022 vest on the three year anniversary of the grant date. Certain additional vesting provisions apply. Each restricted stock unit, once vested, is settled by delivery of one share of ChoiceOne common stock. ChoiceOne recognized compensation expense of $503,000 and $320,000, in 2022 and 2021, respectively, in connection with restricted stock units for current participants during these years.

A summary of the activity for restricted stock units outstanding during the year ended December 31, 2022 is presented below:

Outstanding Stock Awards		Shares				Weighted Average Grant Date Fair Value Per Share
Outstanding at January 1, 2022			35,684			$	28.36
Granted			28,660				26.34
Vested			(10,442	)			27.34
Forfeited			(35	)			26.34
Outstanding at December 31, 2022			53,867			$	27.48

At December 31, 2022, there were 53,867 restricted stock units outstanding with an approximate stock value of $1.6 million based on ChoiceOne’s December 31, 2022 stock price. At December 31, 2021, there were 35,684 restricted stock units outstanding with an approximate stock value of $945,000 based on ChoiceOne’s December 31, 2021 stock price. The grant date fair value of restricted stock units granted was $755,000 and $558,000 in 2022 and 2021, respectively. The cost is expected to be recognized over a weighted average period of 1.68 years. As of December 31, 2022, there was $753,000 of unrecognized compensation cost related to unvested shares granted.

ChoiceOne has granted performance stock units to a select group of employees under the Stock Incentive Plan of 2012. Restricted stock units outstanding as of December 31, 2022 vest on the three year anniversary of the grant date based on earnings per share growth rate from the date of the grant. Shares can vest at a rate of 125%, 100%, 75%, or 0% based on the growth rate achieved over the three year time frame. Certain additional vesting provisions apply. Each restricted stock unit, once vested, is settled by delivery of one share of ChoiceOne common stock. ChoiceOne recognized compensation expense of $47,000 in 2022 in connection with performance stock units for current participants during the year.

A summary of the activity for performance stock units outstanding during the year ended December 31, 2022 is presented below:

						Weighted
						Average Grant
						Date Fair Value
Outstanding Stock Awards		Shares				Per Share
Outstanding at January 1, 2022			-			$	-
Granted			6,396				26.34
Vested			-				-
Forfeited			-				-
Outstanding at December 31, 2022			6,396			$	26.34

At December 31, 2022, there were 6,396 performance stock units outstanding assuming 100% vesting with an approximate stock value of $185,000 based on ChoiceOne’s December 31, 2022 stock price. The grant date fair value of restricted stock units granted was $168,000 in 2022. The cost is expected to be recognized over a weighted average period of 2.36 years. As of December 31, 2022, there was $122,000 of unrecognized compensation cost related to unvested shares granted.