Note 4 – Equity-Based Compensation Plans

The Company recorded total stock-based compensation expense of $123,000 and $127,000 for the three months ended March 31, 2016 and 2015, 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 $48,000 and $50,000 of income tax benefits related to stock based compensation expense in the income statement for the three months ended March 31, 2016 and 2015, respectively.

At March 31, 2016, 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 March 31, 2016, the First Bancorp 2014 Equity Plan was the only plan that had shares available for future grants, and there were 888,381 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.

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 $23,200 in compensation expense related to this grant during the three months ended March 31, 2015.

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 $11,200 and $23,300 in compensation expense during the three months ended March 31, 2016 and 2015, respectively, related to these grants and expects to record $11,200 in compensation expense during each remaining quarter of 2016.

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 $65,700 and $80,500 was recorded as compensation expense during the first quarters of 2016 and 2015, respectively. Grants were issued based on the closing price of the Company's common stock on the date of the grant.

On February 23, 2016, the Company granted a total of 26,032 shares of restricted common stock to eleven senior officers for the attainment of goals related to the Company's annual incentive plan in 2015. The total compensation expense with the grant was $484,000, which is being recorded over the three-year vesting period. The Company recorded $43,700 in compensation expense during the three months ended March 31, 2016 related to these grants, and expects to record $43,700 in each remaining quarter of 2016.

On March 1, 2016, the Company granted 5,266 shares of restricted common stock to an officer with a three year vesting period. Total compensation expense associated with the grant was $100,000. The Company recorded $3,000 in compensation expense during the three months ended March 31, 2016, and expects to record $8,000 in each remaining quarter of 2016.

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 March 31, 2016, there were 109,448 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 for the first three months of 2016 related to 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, 2016		117,408		$	18.12

Granted		—			—
Exercised		(7,960	)		15.99			$	17,263
Forfeited		—			—
Expired		—			—

Outstanding at March 31, 2016		109,448		$	18.27		1.3	$	179,698

Exercisable at March 31, 2016		109,448		$	18.27		1.3	$	179,698

During the three months ended March 31, 2016, the Company received $127,000 as a result of stock option exercises and recorded insignificant tax benefits from the exercise of nonqualified options during the period. The Company did not have any stock option exercises during the three months ended March 31, 2015.

The following table presents information regarding the activity the first three months of 2016 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, 2016		55,329		$	17.31

Granted during the period		31,298			18.65
Vested during the period		(5,219	)		17.77
Forfeited or expired during the period		—			—

Nonvested at March 31, 2016		81,408		$	17.80