NOTE 5 — Share-Based Payment Plans

The Company issues incentive and non-statutory stock options, restricted stock awards (“RSAs”), and performance restricted stock units (“PSUs”) to certain employees and directors pursuant to its equity incentive plans, which have been approved by the stockholders. Share-based awards are granted by the Compensation Committee of the Board of Directors.

Under the plans, options are granted with an exercise price equal to the fair value of the Company’s stock at the date of the grant. Options granted vest over three or five years and have ten-year contractual terms. All options provide for accelerated vesting upon a change in control (as defined in the plans).

The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below. Expected volatilities are based on peer volatility. The Company uses peer data to estimate option exercise and post-vesting termination behavior. The expected term of options granted is based on peer data and represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

Restricted shares are granted at the fair value on the date of grant and vest over five or six years with a third vesting at each of the last three anniversary dates. Restricted shares have the same voting rights as common stock and nonvested restricted shareholders do not have rights to the accrued dividends until vested.

Share payouts of PSUs will be earned based on the Company’s performance with respect to two equally weighted metrics, return on average assets and diluted EPS growth. Performance is measured against pre-established financial targets over a two-year performance period and will cliff vest on the three-year anniversary from the date of grant. Compensation expense on PSUs is based upon the fair value of the shares on the date of the grant for the expected aggregate share payout.

There were no stock options granted during the three months ended March 31, 2025 and 2024.

The following table presents a summary of the activity related to options for the three months ended March 31, 2025:

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The Company recognized compensation expense related to options of $185 thousand and $180 thousand for the three months ended March 31, 2025 and 2024, respectively. At March 31, 2025, unrecognized compensation cost related to nonvested options was approximately $1.3 million and is expected to be recognized over a weighted average period of 2.12 years. The intrinsic value for options outstanding, vested, or expected to vest was $24.2 million and $22.8 million for exercisable options at March 31, 2025.

Information related to stock option exercises during each period is as follows:

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The following table presents a summary of the activity related to restricted stock for the three months ended March 31, 2025:

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The Company recognized compensation expense related to restricted stock of $823 thousand and $787 thousand for the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025, there was $11.7 million of total unrecognized compensation cost related to nonvested shares granted under the plan. The cost is expected to be recognized over a weighted-average period of 4.02 years.

The following table presents a summary of the activity related to PSUs for the three months ended March 31, 2025:

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The Company recognized compensation expense related to PSUs of $80 thousand for the three months ended March 31, 2025 and no PSU expense in the three months ended March 31, 2024. As of March 31, 2025, there was $1.6 million of total unrecognized compensation cost related to nonvested PSUs based on the expected aggregate share payout to be recognized over a weighted-average period of 2.86 years.