Employee Benefits

9 Months Ended

Sep. 30, 2023

Note 9:

Employee Benefits

401(k) Savings Plan

The Company has a retirement savings 401(k) plan covering substantially all employees. Employees may contribute up to the maximum legal limit with the Company matching up to 5% of the employee’s salary. Employer contributions charged to expense for the three months ended September 30, 2023 and 2022 totaled $93,000 and $74,000, respectively. Employer contributions charged to expense for the nine months ended September 30, 2023 and 2022 totaled $302,000 and $281,000, respectively.

Stock-Based Compensation

The Company adopted an equity incentive plan (the “Incentive Plan”) in September 2018. The Incentive Plan permits the grant of restricted stock units and nonqualified incentive stock options. The Incentive Plan will terminate in September 2028, if not extended. Compensation expense related to the Incentive Plan for the three months ended September 30, 2023 and 2022 totaled $565,000 and $341,000, respectively. Compensation expense related to the Incentive Plan for the nine months ended September 30, 2023 and 2022 totaled $1.7 million and $1.1 million, respectively. There were 637,371 shares available for future grants as of September 30, 2023.

The Company grants to employees and directors restricted stock units (RSUs) which vest ratably over one, three, four, five, or eight years and stock options which vest ratably over four years. All RSUs and stock options are granted at the fair value of the common stock at the time of the award. The RSUs are considered fixed awards as the number of shares and fair value are known at the date of grant and the fair value at the grant date is amortized over the vesting and/or service period.

The Company uses newly issued shares for granting RSUs and stock options.

The following table is a summary of the stock option activity under the Incentive Plan (dollar amounts in thousands, except per share data):

	Options			Wgtd. Avg. Exercise Price		Wgtd. Avg. Remaining Contractual Term		Aggregate Intrinsic Value
Nine Months Ended September 30, 2023
Outstanding at December 31, 2022		251,550		$	17.52
Options Granted		-			-
Options Exercised		26,986			17.83
Options Forfeited		(2,188	)		-
Outstanding at September 30, 2023		222,376			17.51		5.90	$	1,119,462
Exercisable at September 30, 2023		174,621			18.00		5.52	$	787,299

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model and is based on certain assumptions including risk-free rate of return, dividend yield, stock price volatility and the expected term. The fair value of each option is expensed over its vesting period.

The following table shows the assumptions used for computing stock-based compensation expense under the fair value method on options granted during the period presented. There were no new grants for the nine months ended September 30, 2023.

	For the Nine Months Ended
	September 30, 2023
Risk-free interest rate		3.47	%
Dividend yield		1.96	%
Stock price volatility		34.92	%
Expected term		7.01

The following table summarizes share information about RSUs for the nine months ended September 30, 2023 and 2022:

	Number of Shares			Wgtd. Avg. Grant Date Fair Value
Nine Months Ended September 30, 2023
Outstanding at December 31, 2022		112,591		$	19.15
Shares granted		163,311			29.76
Shares vested		(40,734	)		19.04
Shares forfeited		(7,087	)		27.34
End of the period balance		228,081		$	26.51

	Number of Shares			Wgtd. Avg. Grant Date Fair Value
Nine Months Ended September 30, 2022
Outstanding at December 31, 2021		172,993		$	19.02
Shares granted		3,000			4.03
Shares vested		(41,584	)		17.93
Shares forfeited		(750	)		22.13
End of the period balance		133,659		$	19.01

As of September 30, 2023, there was approximately $4.9 million of unrecognized compensation expense related to 228,081 unvested RSUs and $201,000 of unrecognized compensation expense related to 222,376 unvested and/or unexercised stock options. The stock option expense is expected to be recognized over a weighted average period of 1.45 years, and the RSU expense is expected to be recognized over a weighted average period of 4.00 years.

As of September 30, 2022, there was approximately $2.1 million of unrecognized compensation expense related to 133,659 unvested RSUs and $385,000 of unrecognized compensation expense related to 250,938 unvested and/or unexercised stock options. The stock option expense is expected to be recognized over a weighted average period of 2.17 years, and the RSU expense is expected to be recognized over a weighted average period of 2.48 years.