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Equity-Based Compensation Plans
 12 Months Ended
Dec. 31, 2016
Equity-Based Compensation Plans [Abstract]  
Equity-Based Compensation Plans

Note 15. Equity-Based Compensation Plans

 

The Company recorded total stock-based compensation expense of $714,000, $710,000 and $270,000 for the years ended December 31, 2016, 2015, and 2014, 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 $264,000, $277,000, and $105,000 of income tax benefits related to stock based compensation expense in the income statement for the years ended December 31, 2016, 2015, and 2014, respectively.

 

At December 31, 2016, the Company had the following equity-based compensation plans: the First Bancorp 2014 Equity Plan and the First Bancorp 2007 Equity 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, 2016, the First Bancorp 2014 Equity Plan was the only plan that had shares available for future grants, and there were 853,920 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, $129,000, and $177,000 for each the three years ended December 31, 2016, 2015 and 2014, respectively, and is classified as “other operating expense” in the Consolidated Statements of Income.

 

In 2014, the Company’s Compensation Committee determined that a group 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. 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 $556,000 and is being recognized over the vesting period. For 2016 and 2015, total compensation expense related to these grants was $220,000 and $93,000, respectively.

 

In 2014, 2015 and 2016, the Compensation Committee also granted 105,616 shares of stock to various employees of the Company to promote retention. The total value associated with these grants amounted to $1.9 million, which is being recorded as expense over their three year vesting periods. For 2016, 2015, and 2014, total compensation expense related to these grants was $366,000, $488,092, and $93,000, respectively. All grants were issued based on the closing price of the Company’s common stock on the date of the grant.

 

Based on the vesting schedules of the shares of restricted stock currently outstanding, the Company expects to record $546,000 in stock-based compensation expense in 2017.

 

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, 2016, there were 59,948 stock options outstanding related to the two First Bancorp plans, with exercise prices ranging from $14.35 to $20.80.

 

 

The following table presents information regarding the activity since January 1, 2014 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, 2014   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           
                     
Balance at December 31, 2015   117,408   $18.12           
                     
   Granted   —    —           
   Exercised   (23,710)   15.84        $81,894 
   Forfeited   —    —           
   Expired   (33,750)   21.39           
                     
Outstanding at December 31, 2016   59,948   $17.18    1.39   $597,148 
                     
Exercisable at December 31, 2016   59,948   $17.18    1.39   $597,148 

 

In 2016, 2015 and 2014, the Company received $375,000, $112,000 and $70,000, respectively, as a result of stock option exercises. The Company recorded insignificant tax benefits from the exercise of nonqualified stock options during the years ended December 31, 2016, 2015, and 2014.

 

The following table summarizes information about the stock options outstanding at December 31, 2016:

 

   Options Outstanding   Options Exercisable 

 

 

Range of

Exercise Prices

  Number
Outstanding
at 12/31/16		   Weighted-
Average
Remaining
Contractual Life		  Weighted-
Average
Exercise
Price		   Number
Exercisable
at 12/31/16		   Weighted-
Average
Exercise
Price		 
                    
$13.27 to $15.48   9,000   2.4  $14.35    9,000   $14.35 
$15.48 to $17.70   34,698   1.5   16.60    34,698    16.60 
$17.70 to $19.91   11,250   0.4   19.61    11,250    19.61 
$19.91 to $22.12   5,000   1.3   20.80    5,000    20.80 
    59,948   1.4  $17.18    59,948   $17.18 
                        

 

The following table presents information regarding the activity during 2014, 2015, and 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, 2014   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 
           
Granted during the period   65,255    19.40 
Vested during the period   (28,794)   17.79 
Forfeited or expired during the period   —    ̶ 
           
Nonvested at December 31, 2016   91,790   $18.65