NOTE 14. STOCK-BASED COMPENSATION

Equity Incentive Plan. The Company’s Amended and Restated 2017 Long-Term Incentive Compensation Plan (the “Plan”) authorizes the grant of various types of equity awards, such as restricted stock, RSUs, stock options and stock appreciation rights to eligible participants, which include all of the Company’s employees, non-employee directors, and consultants. The Plan has reserved a total of 1,200,000 shares of common stock, 600,000 of which were authorized in 2021, for issuance to eligible participants pursuant to equity awards under the Plan. The Plan is administered by the Compensation Committee of the Board, which has the authority to designate participants in the Plan, grant awards and determine the terms and conditions thereof. The Compensation Committee, in its discretion, may delegate its authority and duties under the Plan to specified officers; however, only the Compensation Committee may approve the terms of equity awards to the Company’s executive officers and directors. At December 31, 2025, approximately 213,526 shares remain available for grant.

Stock Options

During the year ended  December 31, 2025, the Company did not grant any stock options. During the years ended December 31, 2024 and 2023, the Company granted 29,997 and 34,497 stock options, respectively, to key personnel that vest in one-fifth increments on each of the first five anniversaries of the grant date, which is the requisite service period. The maximum option term cannot exceed ten years measured from the grant date.

The table below summarizes the Company’s stock option activity for the periods indicated.

The aggregate intrinsic value of stock options is calculated as the aggregate difference between the exercise price of the stock options and the fair market value of the Company’s common stock for those stock options having an exercise price lower than the fair market value of the Company’s common stock. At December 31, 2025, the shares underlying outstanding and exercisable stock options had intrinsic values of $1.8 million and $1.2 million, respectively.

The Company uses a Black-Scholes option pricing model to estimate the fair value of stock options. The Black-Scholes option pricing model incorporates various subjective assumptions, including expected term and expected volatility. Expected volatility was determined based on the historical volatilities of the Company’s stock price. Stock option expense of $0.1 million, $0.2 million, and $0.2 million is included in “Salaries and employee benefits” in the accompanying consolidated statements of income for the years ended  December 31, 2025, 2024 and 2023, respectively. At December 31, 2025, there was $0.2 million of unrecognized compensation cost related to stock options that is expected to be recognized over a weighted average period of 2.5 years.

The table below shows the assumptions used for the stock options granted during the years ended December 31, 2024 and 2023.

Restricted Stock Units

The Company grants time-vested RSUs to its non-employee directors and certain officers, with vesting terms ranging from two years to five years. RSUs represent the right to receive shares of the Company’s common stock in the future upon vesting of the award. RSUs do not have voting rights and do not receive dividends or dividend equivalents. Compensation expense for RSUs is determined based on the market price of the Company’s common stock at the grant date and is applied to the total number of units granted and is recognized on a straight-line basis over the requisite service period of generally five years for employees and, through the end of 2024, two years for non-employee directors. Beginning on January 1, 2025, grants of RSUs to non-employee directors generally vest over a period of five years. Upon vesting of RSUs, the benefit of tax deductions in excess of recognized compensation expense is reflected as an income tax benefit in the consolidated statements of income.

The Company granted a total of 135,220 RSUs to employees and directors for the year ended December 31, 2025. All of the RSUs granted in 2025 vest over five years.

The Company granted a total of 111,792 RSUs to employees and directors for the year ended December 31, 2024. Of the RSUs granted in 2024, 90,574 shares vest over five years and 21,218 shares vest over two years.

The Company granted a total of 172,736 RSUs to employees and directors for the year ended December 31, 2023. Of the RSUs granted in 2023, 153,467 shares vest over five years and 19,269 shares vest over two years.

Compensation expense related to restricted stock and RSUs included in the accompanying consolidated statements of income for each of the years ended  December 31, 2025, 2024 and 2023 was $1.8 million. The unearned compensation related to these awards is amortized on a straight-line basis to compensation expense over the vesting period. As of  December 31, 2025, unearned stock-based compensation cost associated with these awards totaled approximately $4.2 million and is expected to be recognized over a weighted average period of 3.3 years.

The following table summarizes the restricted stock and RSU activity for the years ended December 31, 2025, 2024 and 2023.