NOTE 8. STOCK-BASED COMPENSATION

Equity Incentive Plan. The Company’s Second 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. Under the Plan, a total of 1,800,000 shares of common stock are reserved, 600,000 of which were authorized in 2021 and 600,000 of which were authorized in 2026, for issuance to eligible participants pursuant to equity awards under the Plan. The Plan is administered by the Compensation Committee of the Board, which determines, within the provisions of the Plan, those eligible employees to whom, and the times at which, equity awards will be granted. 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  June 30, 2026, approximately 718,429 shares remain available for grant under the Plan.

Stock Options

The Company grants stock options to key personnel that vest in one-fifth increments on each of the first five anniversaries of the grant date, and the maximum option term cannot exceed ten years measured from the grant date.

The Company uses a Black-Scholes option pricing model to estimate the fair value of stock-based awards. 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 common stock. The Company did not grant any stock options during the six months ended June 30, 2026 and 2025.

Stock option expense of $24,000 and $0.1 million is included in “Salaries and employee benefits” in the accompanying consolidated statements of income for the three and six months ended June 30, 2026, respectively, and $32,000 and $0.1 million for the three and six months ended June 30, 2025, respectively. At  June 30, 2026, 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 2.2 years.

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

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Restricted Stock and RSUs

Under the Plan, the Company  may grant restricted stock, RSUs, and other stock-based awards to Plan participants, subject to forfeiture upon the occurrence of certain events until the vesting dates specified in the participant’s award agreement. Historically, the Company granted restricted stock awards to Plan participants. Beginning in 2019, the Company began granting time-vesting RSUs to its non-employee directors and certain officers of the Company, with vesting terms ranging from two years to five years. The RSUs do not have voting rights and do not receive dividends or dividend equivalents. As of  May 1, 2023, all of the previously granted shares of restricted stock had vested, and only outstanding RSUs remained.

Compensation expense for RSUs, which is calculated based on the market price of the Company’s common stock at the grant date applied to the total number of units granted, is recognized on a straight-line basis over the requisite service period of generally five years for employees and non-employee directors. 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.

Compensation expense related to RSUs of $0.5 million and $0.9 million is included in the accompanying consolidated statements of income for the three and six months ended June 30, 2026, respectively, and $0.5 million and $0.9 million for the three and six months ended June 30, 2025, respectively. The unearned compensation related to these awards is amortized to compensation expense over the vesting period. As of  June 30, 2026, unearned stock-based compensation cost associated with these awards totaled approximately $5.9 million and is expected to be recognized over a weighted average period of 3.7 years.

The following table summarizes the RSU activity for the periods presented.

INVESTAR HOLDING CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)