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Equity-Based Compensation Plans

12 Months Ended

Dec. 31, 2018

Equity-Based Compensation Plans [Abstract]

Equity-Based Compensation Plans

Note 15. Equity-Based Compensation Plans

The Company recorded total stock-based compensation expense of $1,569,000, $1,095,000 and $714,000 for the years ended December 31, 2018, 2017, and 2016, respectively. Of the $1,569,000 in expense that was recorded in 2018, approximately $352,000 related to the June 1, 2018 director grants discussed below, and is classified as “other operating expenses” in the Consolidated Statements of Income. The remaining $1,217,000 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 $367,000, $405,000, and $264,000 of income tax benefits related to stock based compensation expense in the income statement for the years ended December 31, 2018, 2017, and 2016, respectively.

At December 31, 2018, 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 each plan. The First Bancorp 2014 Equity Plan became effective upon the approval of shareholders on May 8, 2014. As of December 31, 2018, the First Bancorp 2014 Equity Plan was the only plan that had shares available for future grants, and there were 750,707 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 have been restricted stock with service vesting conditions only. Compensation expense for these grants is recorded over the requisite service periods. No compensation cost is recognized for grants that do not vest and any previously recognized compensation cost is reversed at forfeiture. The Company issues new shares of common stock when options are exercised.

Certain of the Company’s equity 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 with service conditions only will vest.

As it relates to director equity grants, the Company typically grants shares of common stock to each non-employee director (currently 11 in total) in June of each year. On June 1, 2018, the Company granted 8,393 shares of common stock to non-employee directors (763 shares per director), at a fair market value of $41.93 per share, which was the closing price of the Company’s common stock on that date, which resulted in $352,000 in expense. On June 1, 2017, the Company granted 11,190 shares of common stock to non-employee directors (1,119 shares per director), at a fair market value of $28.59 per share, which was the closing price of the Company’s common stock on that date, which resulted in $320,000 in expense.

The Company’s senior officers 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. In the last three years, a total of 54,529 shares of restricted stock have been granted related to performance in the preceding fiscal years (net of an immaterial amount of forfeitures). Total compensation expense associated with those grants was $1,410,000 and is being recognized over the respective vesting periods. The Company recorded $293,000, $282,000 and $220,000, for the years ended December 31, 2018, 2017 and 2016, respectively.

In the last three years, the Compensation Committee of the Company’s Board of Directors also granted 117,704 shares of stock to various employees of the Company to promote retention. The total value associated with these grants amounted to $3,621,000, and is being recorded as expense over their three year vesting periods. For 2018, 2017, and 2016, total compensation expense related to these grants was $924,000, $491,000, and $366,000, 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 $1,218,000 in stock-based compensation expense in 2019.

The following table presents information regarding the activity during 2016, 2017, and 2018 related to the Company’s outstanding restricted stock:

		Long-Term Restricted Stock

Nonvested at January 1, 2016			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

Granted during the period			48,322				31.05
Vested during the period			(28,514	)			20.05
Forfeited or expired during the period			(8,535	)			18.34

Nonvested at December 31, 2017			103,063			$	24.08

Granted during the period			66,060				40.04
Vested during the period			(35,703	)			22.82
Forfeited or expired during the period			(4,169	)			29.99

Nonvested at December 31, 2018			129,251			$	32.39

In years prior to 2010, stock options were the primary form of equity grant utilized by the Company. The stock options had a term of 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, 2018, there were 9,000 stock options outstanding related to the Company’s two equity-based plans, all with an exercise price of $14.35 and an exercise date of June 1, 2019.

The following table presents information regarding the activity since January 1, 2016 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, 2016			117,408			$	18.12

Granted			—				—
Exercised			(23,710	)			15.84							$	81,894
Forfeited			—				—
Expired			(33,750	)			21.39

Balance at December 31, 2016			59,948			$	17.18

Granted			—				—
Exercised			(21,259	)			19.16							$	236,584
Forfeited			—				—
Expired			—				—

Balance at December 31, 2017			38,689			$	16.09

Granted			—				—
Exercised			(29,689	)			16.61							$	659,743
Forfeited			—				—
Expired			—				—

Outstanding at December 31, 2018			9,000			$	14.53				0.42			$	163,038

Exercisable at December 31, 2018			9,000			$	14.53				0.42			$	163,038

In 2018, 2017 and 2016, the Company received $324,000, $287,000 and $375,000, respectively, as a result of stock option exercises.