At the Annual Meeting held on April 22, 2014, the Company’s stockholders approved the Norwood Financial Corp 2014 Equity Incentive Plan. An aggregate of 375,000 shares of authorized but unissued Common Stock of the Company were reserved for future issuance under the Plan. This includes up to 60,000 shares for awards to outside directors. The Plan also authorized the Company to award restricted stock to officers and outside directors, limited to 63,000 shares of restricted stock awards for officers and 12,000 shares of restricted stock awards for outside directors. At the Annual Meeting held on April 24, 2018, the Company’s stockholders approved an amendment to the 2014 Equity Incentive Plan to ease certain restrictions on restricted stock awards to outside directors. As a result of this amendment, the number of shares available for restricted stock awards to officers was reduced by 300 shares to 62,700, while the number of shares available for restricted stock awards to outside directors was increased by 20,300 to 32,300 shares. At the Annual Meeting held on April 26, 2022, the Company’s stockholders approved an amendment to the 2014 Equity Incentive Plan to increase the number of shares available for awards. As a result of this amendment, the number of shares available for stock awards to officers was increased by 60,000 shares, including 40,000 shares for restricted stock awards, while the number of shares available for stock awards to outside directors was increased by 40,000 shares, including 30,000 shares for restricted stock awards. Under this plan, the Company has granted 357,966 shares, which included 229,866 options to employees, 10,400 options to directors, 74,125 shares of restricted stock to officers and 43,575 shares of restricted stock to directors. The restricted shares vest over five years. The product of the number of shares granted and the grant date market price of the Company’s common stock determine the fair value of restricted stock under the company’s restricted stock plan. Management recognizes compensation expense for the fair value of restricted stock on a straight-line basis over the requisite service period for the entire award. As of December 31, 2022, there were 117,035 shares available for future awards under this plan, which includes 71,010 shares available for officer awards and 46,025 shares available for awards to outside directors. Included in these totals are 28,575 shares available for restricted stock awards to officers and 18,725 shares available for restricted stock awards to outside directors.

Total unrecognized compensation cost related to stock options was $382,000 as of December 31, 2022 and $269,000 as of December 31, 2021. Salaries and employee benefits expense includes $269,000 and $214,000 of compensation costs related to options for the years ended December 31, 2022 and 2021, respectively. Compensation costs related to restricted stock amounted to $372,000 and $335,000 for the years ended December 31, 2022 and 2021, respectively. The expected future compensation expense relating to non-vested restricted stock outstanding as of December 31, 2022 and 2021 was $1,294,000 and $953,000, respectively.

A summary of the Company’s stock option activity and related information for the years ended December 31 follows:



	2022					2021
		Weighted					Weighted
		Average		Average			Average		Average
		Exercise		Intrinsic			Exercise		Intrinsic
	Options	Price		Value		Options	Price		Value
Outstanding, beginning of year	226,075	$	26.37			215,970	$	25.73
Granted	38,000		33.53			43,500		25.80
Exercised	(34,425)		19.08			(22,420)		17.59
Forfeited	(10,675)		27.56			(10,975)		29.48

Outstanding, end of year	218,975	$	26.70	$	1,100	226,075	$	26.37	$	520

Exercisable, end of year	180,975	$	27.68	$	1,100	182,575	$	26.50	$	511

Exercise prices for options outstanding as of December 31, 2022 ranged from $17.93 to $36.02 per share. The weighted average remaining contractual life is 6.8 years.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:

The expected volatility is based on historical volatility. The risk-free interest rates for periods within the contractual life of the awards are based on the U.S. Treasury yield curve in effect at the time of the grant. The expected life is based on historical exercise experience. The dividend yield assumption is based on the Company’s history and expectation of dividend payouts.

Proceeds from stock option exercises totaled $657,000 in 2022. Shares issued in connection with stock option exercises are issued from available treasury shares or from available authorized shares. During 2022, for the shares issued in connection with stock option exercises, 1,650 shares in total, all shares were issued from available authorized shares.



		Average				Average
	Options	Exercise		Remaining	Options	Exercise
	Outstanding	Price		Life, Years	Exercisable	Price

	11,125	$	17.93	1.0	11,125	$	17.93
	8,250		19.39	1.9	8,250		19.39
	9,375		19.03	2.9	9,375		19.03
	12,125		22.37	4.0	12,125		22.37
	25,250		32.81	5.0	25,250		32.81
	22,100		32.34	6.0	22,100		32.34
	22,500		36.02	7.0	22,500		36.02
	30,750		26.93	8.0	30,750		26.93
	1,000		26.35	8.3	1,000		26.35
	1,000		25.38	8.5	1,000		25.38
	37,500		25.80	9.0	37,500		25.80
	38,000		33.53	10.0	—		—

Total	218,975				180,975

A summary of the Company’s restricted stock activity and related information for the years ended December 31 is as follows:


	2022		2021
		Weighted-Average		Weighted-Average
	Number of	Grant Date	Number of	Grant Date
	Shares	Fair Value	Shares	Fair Value
Non-vested, beginning of year	32,030	$26.76	39,135	$30.72
Granted	23,000	30.25	8,000	25.80
Vested	(10,570)	30.89	(11,205)	32.15
Forfeited	—	—	(3,900)	31.72
Non-vested at December 31	44,460	$30.12	32,030	$26.76