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Note 13 - Stock-based Compensation

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Compensation and Employee Benefit Plans [Text Block]

13.

STOCK-BASED COMPENSATION

The Company maintains a stock incentive plan under which incentive and nonqualified stock options and other stock awards may be granted. On March 13, 2014, the Company’s Board of Directors adopted, and on May 29, 2014 our shareholders approved, the 2014 Amended and Restated Stock Option and Incentive Plan (the “Plan”) which amended and restated the Company’s 2006 Stock Option Plan. Under the Plan, 3,000,000 shares (as adjusted for the Company’s 2-for-1 forward split of its common stock paid in August 2021 and the Company’s 2-for-1 forward split of its common stock paid in March 2022) are reserved for the issuance of stock awards to directors, officers, key employees, and others. The stock option exercise price and the restricted stock purchase price under the 2014 Plan shall not be less than 85% of the fair market value of the Company’s common stock on the date the award is granted. The fair market value is determined by the closing price of the Company’s common stock, on its primary exchange, on the same date that the option or award is granted.

The Company granted unrestricted shares of its common stock to its non-employee directors and granted restricted shares of common stock to certain key employees during all periods presented. All share and per share amounts set forth below have been adjusted to reflect the impact of the 2-for-1 forward stock split in both August 2021 and March 2022.

During February 2022, the Company granted 29,120 shares of common stock to certain key employees. These stock awards had grant date fair values of $38.80 per share, based on the closing price of the Company’s stock on the date of grant, and vest in 25% increments over four years, beginning one year from the anniversary date of the grant.

During May 2022, the Company granted 1,855 shares of common stock to non-employee directors. These stock awards had a grant date fair value of $29.60 per share, based on the closing price of the Company’s stock on the date of grant, and vested immediately.

During June 2022, the Company granted 3,500 shares of common stock to a key employee. This stock award had a grant date fair value of $27.68 per share, based on the closing price of the Company’s stock on the date of grant, and vests in 25% increments over four years, beginning one year from the anniversary date of the grant.

In March 2021, the Company granted 5,216 shares of common stock to non-employee directors. These restricted stock awards have a grant date fair value of $15.43 per share, based on the closing price of the Company’s stock on the date of grant, and vested immediately.

In April 2021, the Company granted 10,000 shares of common stock to a certain key employee. These stock awards have a grant date fair value of $15.09 per share, based on the closing price of the Company’s stock on the date of grant, and vests in 25% increments over four years, beginning one year from the anniversary date of the grant.

In January 2020, the Company granted 28,000 shares of common stock to certain key employees. These restricted stock awards have a grant date fair value of $14.11 per share, based on the closing price of the Company’s stock on the date of grant, and vest on the four year anniversary date of the award.

In March 2020, the Company granted 10,432 shares of common stock to non-employee directors. These stock awards have a grant date fair value of $7.69 per share, based on the closing price of the Company’s stock on the date of grant, and vested immediately.

In April 2020, the Company granted 968 shares of common stock to a non-employee director. This stock award has a grant date fair value of $10.35 per share, based on the closing price of the Company’s stock on the date of grant, and vested immediately.

In August 2020, the Company granted 160,000 restricted shares of common stock to the Company’s Chief Executive Officer. This restricted stock award has a grant date fair value of $8.84, based on the closing price of the Company’s stock on the date of grant, and will vest in increments of 20,000 shares each in 2022, 2023, 2024 and 2027 and 40,000 shares each in 2025 and 2026.

In August 2020, the Company granted 53,328 shares of common stock to certain key employees. These restricted stock awards have a grant date fair value of $7.56 per share, based on the closing price of the Company’s stock on the date of grant, and vest on the four year anniversary date of the award.

During 2022 and 2021, there were no grants of stock options and there were no outstanding stock options at December 31, 2022 or December 31, 2021. At December 31, 2022, approximately 716,000 shares were available for granting future options or restricted stock.

The grant date fair value of stock and stock options vested during 2022, 2021 and 2020 was approximately $392,000, $203,000 and $759,000, respectively. Total pre-tax stock-based compensation expense, recognized in salaries, wages and benefits was approximately $715,000 during 2022 and includes approximately $55,000 recognized as a result of the grant of a total of 1,855 shares of stock to four non-employee directors during the second quarter of 2022. The Company recognized a total income tax benefit of approximately $170,000 related to stock-based compensation expense during 2022. The recognition of stock-based compensation expense decreased diluted earnings per common share by $0.03 and basic earnings per common share by approximately $0.02 during 2022. As of December 31, 2022, the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately $2,414,000 which is being amortized over the remaining vesting period. As a result, the Company expects to recognize the following approximate amounts of additional compensation expense related to unvested restricted stock awards during each of the years indicated:

2023		$	649,000
2024		$	641,000
2025		$	670,000
2026		$	343,000
2027		$	111,000

Total pre-tax stock-based compensation expense, recognized in salaries, wages and benefits was approximately $441,000 during 2021 and includes approximately $80,000 recognized as a result of the grant of 652 shares of stock to eight non-employee directors during the first quarter of 2021. The Company recognized a total income tax benefit of approximately $110,000 related to stock-based compensation expense during 2021. The recognition of stock-based compensation expense decreased diluted earnings per common share by $0.03 and basic earnings per common share by approximately $0.02 during 2021.

Total pre-tax stock-based compensation expense, recognized in salaries, wages and benefits was approximately $461,000 during 2020 and includes approximately $90,000 recognized as a result of the grant of 1,304 shares of stock to eight non-employee directors during the first quarter of 2020 and 968 shares of stock to one non-employee director during the second quarter of 2020. The Company recognized a total income tax benefit of approximately $100,000 related to stock-based compensation expense during 2020. The recognition of stock-based compensation expense decreased both diluted and basic earnings per common share by approximately $0.06 during 2020.

There were no options granted during 2022, 2021, or 2020.

A summary of the status of the Company’s non-vested restricted stock as of December 31, 2022 and changes during the year ended December 31, 2022, is presented below:

		Restricted Stock
		Number of Shares				Weighted- Average Grant Date Fair Value
Nonvested—January 1, 2022			239,212			$	9.25
Granted			34,475				37.18
Canceled/forfeited/expired			-				-
Vested			(37,855	)			10.36
Nonvested—December 31, 2022:			235,832			$	13.15