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Equity-Based Compensation Plans
 6 Months Ended
Jun. 30, 2016
Equity-Based Compensation Plans [Abstract]  
Equity-Based Compensation Plans

Note 4 – Equity-Based Compensation Plans

 

The Company recorded total stock-based compensation expense of $258,000 and $277,000 for the three months ended June 30, 2016 and 2015, respectively, and $380,000 and $404,000 for the six months ended June 30, 2016 and 2015, respectively. Of the $380,000 in expense that was recorded in 2016, approximately $129,000 related to the June 1, 2016 director grants, which is classified as “other operating expenses” in the Consolidated Statements of Income. The remaining $251,000 in expense relates to the employee grants discussed below and is recorded as “salaries expense.” 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 $148,000 and $157,500 of income tax benefits related to stock based compensation expense in the income statement for the six months ended June 30, 2016 and 2015, respectively.

 

At June 30, 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 June 30, 2016, the First Bancorp 2014 Equity Plan was the only plan that had shares available for future grants, and there were 881,797 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. On June 1, 2016, the Company granted 6,584 shares of common stock to non-employee directors (823 shares per director), at a fair market value of $19.56 per share, which was the closing price of the Company’s common stock on that date. On June 1, 2015, the Company granted 8,176 shares of common stock to non-employee directors (1,022 shares per director), at a fair market value of $15.75 per share, which was the closing price of the Company’s common stock on that date.

 

Based on the Company’s performance in 2013, the Company granted long-term 15,657 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 $46,000 in compensation expense related to this grant during the six months ended June 30, 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 solely in cash. Accordingly, in February 2015 and February 2016, a total of 40,914 shares of restricted stock were granted related to performance in the preceding fiscal year. Total compensation expense associated with those grants was $742,000 and is being recognized over the vesting period. For the three and six months ended June 30, 2016, total compensation expense related to these grants was $55,000 and $111,000, respectively compared to $67,000 and $134,000 for the three and six months ended June 30, 2015, respectively.

 

In 2015 and 2016, the Compensation Committee also granted 56,002 shares of stock to various employees of the Company to promote retention. The total value associated with these grants amounted to $976,000, which is being recorded as expense over their three year vesting periods. For the three and six months ended June 30, 2016, total compensation expense related to these grants was $69,000 and $139,000, respectively compared to $101,000 and $182,000 for the three and six months ended June 30, 2015, respectively.

 

Based on the vesting schedules of the shares of restricted stock currently outstanding, the Company expects to record $255,000 in stock-based compensation expense over the remainder 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 June 30, 2016, there were 59,948 stock options outstanding related to the three First Bancorp plans, with exercise prices ranging from $14.35 to $21.80.

 

The following table presents information regarding the activity for the first six 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     (23,710 )     15.84             $ 81,894  
   Forfeited     —       —                  
   Expired     (33,750 )     21.39                  
                                 
Outstanding at June 30, 2016     59,948     $ 17.18       1.9     $ 57,084  
                                 
Exercisable at June 30, 2016     59,948     $ 17.18       1.9     $ 57,084  

 

During the three and six months ended June 30, 2016, the Company received $248,000 and $375,000, respectively, as a result of stock option exercises and recorded insignificant tax benefits from the exercise of nonqualified options during the period. During the three and six months ended June 30, 2015, the Company received $32,000 as a result of stock option exercises.

 

The following table presents information regarding the activity for the first six 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 June 30, 2016     81,408     $ 17.80