ESSENTIAL UTILITIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (continued) (In thousands of dollars, except per share amounts)
Options under the plans were issued at the closing market price of the stock on the day of the grant. The fair value of options was estimated at the grant date using the Black-Scholes option-pricing model, which relies on assumptions that require management’s judgment. The following table provides the assumptions used in the pricing model for grants and the resulting grant date fair value of stock options granted in the period reported:
2025
2024
2023
Expected term (years) Risk-free interest rate Expected volatility
5.5
5.5
5.5
4.22% 28.50% 3.69%
4.00% 28.30% 3.43%
4.03% 27.80% 2.53%
Dividend yield
Grant date fair value per option
$
7.95 $
8.12 $ 11.37
Historical information was the principal basis for the selection of the expected term and dividend yield. The expected volatility is based on a weighted-average combination of historical and implied volatilities over a period that approximates the expected term of the option. The risk-free interest rate was selected based upon the U.S. Treasury yield curve in effect at the time of grant for the expected term of the option. The Company assumes that forfeitures will be minimal, and recognizes forfeitures as they occur, which results in a reduction in compensation expense.
The following table summarizes stock option transactions for the year ended December 31, 2025:
Weighted Average Exercise Price
Weighted Average
Aggregate Intrinsic Value
Remaining Life (years)
Shares
Outstanding, beginning of year
906,902 $
36.87 35.33 36.16 41.15 35.13 36.63
Granted Forfeited
197,805 (6,566) (1,517) (27,238)
Expired / Cancelled
Exercised
Outstanding at end of year
1,069,386 $
5.0$ 2,778
Exercisable at end of year
784,179 $
36.79
3.6$ 2,011
The intrinsic value of stock options is the amount by which the market price of the stock on a given date, such as at the end of the period or on the day of exercise, exceeded the closing market price of stock on the date of grant. The following table summarizes the intrinsic value of stock options exercised and the fair value of stock options which vested:
Years ended December 31, 2025 2024 2023
Intrinsic value of options exercised
$ $
138 $ 172 $ 750 $ 502 $
64
Fair value of options vested
236
69
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