Note 15. Equity-Based Compensation Plans

The Company recorded total stock-based compensation expense of $710,000, $270,000 and $222,000 for the years ended December 31, 2015, 2014, and 2013, respectively. Stock based compensation is reflected as an adjustment to cash flows from operating activities on the Company's Consolidated Statement of Cash Flows. The Company recognized $277,000, $105,000, and $87,000 of income tax benefits related to stock based compensation expense in the income statement for the years ended December 31, 2015, 2014, and 2013, respectively.

At December 31, 2015, the Company had the following equity-based compensation plans: the First Bancorp 2014 Equity Plan, the First Bancorp 2007 Equity Plan, and the First Bancorp 2004 Stock Option Plan. The Company's shareholders approved all equity-based compensation plans. The First Bancorp 2014 Equity Plan became effective upon the approval of shareholders on May 8, 2014. As of December 31, 2015, the First Bancorp 2014 Equity Plan was the only plan that had shares available for future grants, and there were 919,659 shares remaining available for grant.

The First Bancorp 2014 Equity Plan is intended to serve as a means to attract, retain and motivate key employees and directors and to associate the interests of the plans' participants with those of the Company and its shareholders. The First Bancorp 2014 Equity Plan allows for both grants of stock options and other types of equity-based compensation, including stock appreciation rights, restricted stock, restricted performance stock, unrestricted stock, and performance units.

Recent equity grants to employees have either had performance vesting conditions, service vesting conditions, or both. Compensation expense for these grants is recorded over the various service periods based on the estimated number of equity grants that are probable to vest. No compensation cost is recognized for grants that do not vest and any previously recognized compensation cost will be reversed. The Company issues new shares of common stock when options are exercised.

Certain of the Company's stock option grants contain terms that provide for a graded vesting schedule whereby portions of the award vest in increments over the requisite service period. The Company recognizes compensation expense for awards with graded vesting schedules on a straight-line basis over the requisite service period for each incremental award. Compensation expense is based on the estimated number of stock options and awards that will ultimately vest. Over the past five years, there have only been minimal amounts of forfeitures, and therefore the Company assumes that all awards granted without performance conditions will become vested.

As it relates to director equity grants, the Company grants common shares, valued at approximately $16,000 to each non-employee director (currently eight in total) in June of each year. Compensation expense associated with these director grants is recognized on the date of grant since there are no vesting conditions. Total stock-based compensation expense related to these grants was $129,000, $177,000, and $193,000 for each the three years ended December 31, 2015, 2014 and 2013, respectively, and is classified as “other operating expense” in the Consolidated Statements of Income.

Pursuant to an employment agreement, the Company granted the chief executive officer 75,000 non-qualified stock options and 40,000 shares of restricted stock during the third quarter of 2012. The option award would have fully vested on December 31, 2014 if the Company achieved a certain earnings target for 2014. The Company did not achieve the applicable target and therefore the award was forfeited as of December 31, 2014. No compensation expense was recognized for the option award. The restricted stock award would have fully vested on December 31, 2015, if the Company achieved a certain earnings target for 2015. The Company did not achieve the applicable target, and therefore the restricted stock award was forfeited as of December 31, 2015. No compensation expense was recognized for the restricted stock award.

Based on the Company's performance in 2013, the Company granted long-term restricted shares of common stock to the chief executive officer on February 11, 2014 with a two-year vesting period. The total compensation expense associated with the grant was $278,200. The Company recorded $92,800 in compensation expense related to this grant during 2015 and 2014.

In 2014, the Company's Compensation Committee determined that seven of the Company's senior officers would receive their annual bonus earned under the Company's annual incentive plan in a mix of 50% cash and 50% stock, with the stock being subject to a three year vesting term. Previously, awards under this plan were paid all in cash. This resulted in the Company granting a total of 14,882 shares of restricted common stock to those officers on February 24, 2015. The total compensation expense associated with this grant was $258,000, which is being recorded over the vesting period. The Company recorded $93,100 in compensation expense during 2015 related to these grants.

In 2015, additional stock grants of 50,736 shares were made to 19 officers of the Company, each with three year vesting schedules. The total value of these grants amounted to $876,000, of which $395,000 was recorded as expense in during 2015. Grants were issued based on the closing price of the Company's common stock on the date of grant.

The Company's equity grants for 2014 were the issuance of 1) 15,657 shares of long-term restricted stock to the chief executive officer on February 11, 2014, at a fair market value of $17.77 per share, which was the closing price of the Company's common stock on that date, and 2) 10,065 shares of common stock to non-employee directors on June 2, 2014 (915 shares per director), at a fair market value of $17.60 per share, which was the closing price of the Company's common stock on that date.

The Company's equity grants for 2013 were the issuance of 13,164 shares of common stock to non-employee directors on June 3, 2013 (1,097 shares per director), at a fair market value of $14.68 per share, which was the closing price of the Company's common stock on that date.

Under the terms of the predecessor plans and the First Bancorp 2014 Equity Plan, stock options can have a term of no longer than ten years. In a change in control (as defined in the plans), unless the awards remain outstanding or substitute equivalent awards are provided, the awards become immediately vested.

At December 31, 2015, there were 117,408 stock options outstanding related to the three First Bancorp plans, with exercise prices ranging from $14.35 to $21.83.

The following table presents information regarding the activity since January 1, 2013 related to all of the Company's stock options outstanding:

	Options Outstanding
	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Contractual Term (years)		Aggregate Intrinsic Value

Balance at January 1, 2013		487,530		$	17.64

Granted		—			—
Exercised		—			—
Forfeited		—			—
Expired		(94,872	)		17.36

Balance at December 31, 2013		392,658		$	17.71

Granted		—			—
Exercised		(4,500	)		15.58			$	6,525
Forfeited		(75,000	)		9.76
Expired		(134,056	)		21.10

Balance at December 31, 2014		179,102		$	18.55

Granted		—			—
Exercised		(7,353	)		15.20			$	19,843
Forfeited		—			—
Expired		(54,341	)		19.93

Outstanding at December 31, 2015		117,408		$	18.12		1.57	$	206,134

Exercisable at December 31, 2015		117,408		$	18.12		1.57	$	206,134

In 2015 and 2014, the Company received $112,000 and $70,000, respectively, as a result of stock option exercises. No stock options were exercised in 2013. The Company recorded insignificant tax benefits from the exercise of nonqualified stock options during the years ended December 31, 2015, 2014, and 2013.

The following table summarizes information about the stock options outstanding at December 31, 2015:

	Options Outstanding					Options Exercisable
Range of Exercise Prices	Number Outstanding at 12/31/15		Weighted- Average Remaining Contractual Life	Weighted- Average Exercise Price		Number Exercisable at 12/31/15		Weighted- Average Exercise Price

$14.35		18,000	2.6	$	14.35		18,000	$	14.35
$14.36 to $17.70		49,408	2.0		16.64		49,408		16.64
$17.70 to $19.91		18,000	1.0		19.61		18,000		19.61
$19.91 to $22.12		32,000	0.7		21.67		32,000		21.67
		117,408	1.6	$	18.12		117,408	$	18.12

The following table presents information regarding the activity during 2013, 2014, and 2015 related to the Company's outstanding restricted stock:

	Long-Term Restricted Stock
	Number of Units			Weighted- Average Grant-Date Fair Value

Nonvested at January 1, 2013		54,344		$	10.48

Granted during the period		—			—
Vested during the period		(6,163)			14.54
Forfeited or expired during the period		(2,807	)		10.96

Nonvested at December 31, 2013		45,374		$	9.90

Granted during the period		15,657			17.77
Vested during the period		(10,593	)		14.32
Forfeited or expired during the period		—			—

Nonvested at December 31, 2014		50,438		$	11.42

Granted during the period		65,618			17.28
Vested during the period		(20,117	)		17.44
Forfeited or expired during the period		(40,610)			9.87

Nonvested at December 31, 2015		55,329		$	17.31