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Stock Based Compensation | 12 Months Ended
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Dec. 31, 2023
Stock Based Compensation [Abstract] |
Stock-Based Compensation | NOTE 12 - STOCK BASED COMPENSATION 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 418,432 shares, which included 270,866 options to employees, 10,400 options to directors, 86,591 shares of restricted stock to officers and 50,575 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, 2023, there were 56,569 shares available for future awards under this plan, which includes 17,544 shares available for officer awards and 39,025 shares available for awards to outside directors. Included in these totals are 16,109 shares available for restricted stock awards to officers and 11,725 shares available for restricted stock awards to outside directors. Total unrecognized compensation cost related to stock options was $346,000 as of December 31, 2023 and $382,000 as of December 31, 2022. Salaries and employee benefits expense includes $401,000 and $269,000 of compensation costs related to options for the years ended December 31, 2023 and 2022, respectively. Compensation costs related to restricted stock amounted to $429,000 and $372,000 for the years ended December 31, 2023 and 2022, respectively. The expected future compensation expense relating to non-vested restricted stock outstanding as of December 31, 2023 and 2022 was $1,356,000 and $1,294,000, respectively. A summary of the Company’s stock option activity and related information for the years ended December 31 follows:
| 2023 |  | 2022
|  |  | Weighted |  |  |  |  |  | Weighted |  |
|  |  | Average |  |  |  |  |  | Average |  |
|  |  | Exercise |  | Intrinsic |  |  |  | Exercise |  | Intrinsic
| Options |  | Price |  | Value |  | Options |  | Price |  | Value
Outstanding, beginning of year | 218,975 |  | $ | 26.70 |  |  |  |  | 226,075 |  | $ | 26.37 |  |  |
Granted | 41,000 |  |  | 29.66 |  |  |  |  | 38,000 |  |  | 33.53 |  |  |
Exercised | (38,000) |  |  | 23.30 |  |  |  |  | (34,425) |  |  | 19.08 |  |  |
Forfeited | (6,250) |  |  | 29.16 |  |  |  |  | (10,675) |  |  | 27.56 |  |  |
Outstanding, end of year | 215,725 |  | $ | 29.81 |  | $ | 759 |  | 218,975 |  | $ | 26.70 |  | $ | 1,100
Exercisable, end of year | 174,725 |  | $ | 29.85 |  | $ | 626 |  | 180,975 |  | $ | 27.68 |  | $ | 1,100
Exercise prices for options outstanding as of December 31, 2023 ranged from $19.03 to $36.02 per share. The weighted average remaining contractual life is 6.9 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:
| Years Ended December 31,
| 2023 |  | 2022
Dividend yield |  | 3.59% |  |  | 3.57%
Expected life |  | 10 years |  |  | 10 years
Expected volatility |  | 35.09% |  |  | 35.01%
Risk-free interest rate |  | 3.88% |  |  | 3.87%
Weighted average fair value of options granted | $ | 8.90 |  | $ | 10.06
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 $886,000 in 2023. Shares issued in connection with stock option exercises are issued from available treasury shares or from available authorized shares. During 2023, for the shares issued in connection with stock option exercises, 38,000 shares in total, all shares were issued from treasury shares. As of December 31, 2023, outstanding stock options consist of the following:
| Options |  | Exercise |  | Remaining |  | Options |  | Exercise
| Outstanding |  | Price |  | Life, Years |  | Exercisable |  | Price
| 4,125 |  | $ | 19.39 |  | 1.0 |  | 4,125 |  | $ | 19.39
| 7,125 |  |  | 19.03 |  | 1.9 |  | 7,125 |  |  | 19.03
| 10,125 |  |  | 22.37 |  | 3.0 |  | 10,125 |  |  | 22.37
| 23,750 |  |  | 32.81 |  | 4.0 |  | 23,750 |  |  | 32.81
| 20,600 |  |  | 32.34 |  | 5.0 |  | 20,600 |  |  | 32.34
| 22,500 |  |  | 36.02 |  | 6.0 |  | 22,500 |  |  | 36.02
| 23,500 |  |  | 26.93 |  | 7.0 |  | 23,500 |  |  | 26.93
| 1,000 |  |  | 26.35 |  | 7.3 |  | 1,000 |  |  | 26.35
| 1,000 |  |  | 25.38 |  | 7.5 |  | 1,000 |  |  | 25.38
| 27,500 |  |  | 25.80 |  | 8.0 |  | 27,500 |  |  | 25.80
| 33,500 |  |  | 33.53 |  | 9.0 |  | 33,500 |  |  | 33.53
| 2,500 |  |  | 29.60 |  | 9.2 |  |  |  |  |
| 38,500 |  |  | 29.66 |  | 10.0 |  |  |  |  |
Total | 215,725 |  |  |  |  |  |  | 174,725 |  |  |
A summary of the Company’s restricted stock activity and related information for the years ended December 31 is as follows:
|  | 2023 |  | 2022
|  |  |  | Weighted-Average |  |  |  | Weighted-Average
|  | Number of |  | Grant Date |  | Number of |  | Grant Date
|  | Shares |  | Fair Value |  | Shares |  | Fair Value
Non-vested, beginning of year |  | 44,460 |  | $30.12 |  | 32,030 |  | $26.76
Granted |  | 19,446 |  | 29.66 |  | 23,000 |  | 30.25
Vested |  | (15,090) |  | 30.20 |  | (10,570) |  | 30.89
Forfeited |  | (2,850) |  | 30.15 |  | — |  | —
Non-vested at December 31 |  | 45,966 |  | $29.90 |  | 44,460 |  | $30.12

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