NOTE 17: STOCK-BASED COMPENSATION

The Company acquired a stock option plan which originated under VB Texas, Inc. in 2006. The options granted to employees must be exercised within 10 years from the date of grant and vesting schedules are determined on an individual basis. At the merger date, all outstanding options became fully vested and were converted to options of the Company’s common stock at an exchange ratio equal to the acquisition exchange rate for common shares. No options were granted under this plan after October 24, 2016.

The Company also acquired a stock option plan that originated in May 2011 under VB Texas, Inc., or the 2011 Plan. At the merger date, all outstanding options became fully vested and were converted to options of the Company’s common stock at an exchange ratio equal to the acquisition exchange rate for common shares. On August 7, 2017, the Board of Directors of the Company terminated the 2011 Plan. At the date of termination, there were no options outstanding under this plan.

In May 2014, the Company adopted the 2014 Stock Option Plan, or the 2014 Plan. The 2014 Plan was approved by the Company’s shareholders and limits the number of shares that may be optioned to 1,127,200. The 2014 Plan provides that no options may be granted after May 20, 2024. Options granted under the 2014 Plan expire 10 years from the date of grant and become exercisable in installments over a period of one to five years, beginning on the first anniversary of the grant. At December 31, 2017, 959,200 shares were available for future grant under the 2014 Plan.

On September 13, 2017, the Company’s shareholders approved the Company’s 2017 Omnibus Incentive Plan, or the 2017 Plan. The 2017 Plan authorizes the Company to grant options, restricted stock awards as well as various other stock-based awards to eligible employees, consultants and non‑employee directors up to an aggregate of 600,000 shares of common stock. At December 31, 2017, 387,420 shares were available for future grant under the 2017 Plan.

The following table summarizes activity under the stock option plans for the years ended December 31, 2017 and 2016 and the balances as of those dates:


	December 31,
	2017			2016
	Number of	Weighted		Number of	Weighted
	Shares	Average		Shares	Average
	Underlying	Exercise		Underlying	Exercise
(Dollars in thousands, except per share data)	Options	Price		Options	Price
Options outstanding at beginning of period	248,314	$	12.80	647,074	$	10.99
Granted	80,000	$	21.00	—	$	—
Forfeited	(56,832)	$	10.14	(5,062)	$	9.85
Exercised	(11,160)	$	10.47	(393,698)	$	9.87
Options outstanding at end of period	260,322	$	16.00	248,314	$	12.80

The fair value of each option grant is estimated on the date of grant using the Black‑Scholes option pricing model. The following assumptions were used for the 2017 and 2015 grants.


	Year Ended		Year Ended
	December 31,		December 31,
	2017		2015
Dividend yield	0.95	%	1.19	%
Expected volatility	35.97	%	8.96	%
Risk free interest rate	2.42	%	2.05	%
Expected life in years	6.0		6.0

The dividend yield assumption is based on the Company’s history and expectation of dividend payouts. Expected volatility is based on the volatility of certain comparable public company peers. The risk‑free interest rate is based upon the U.S. Treasury yield curve in effect at the time of grant. Expected life is based on the ten-year option expiration term or historical exercise experience.


	December 31, 2017
Stock Options		Exercisable		Unvested		Outstanding
Number of shares underlying options		127,122		133,200		260,322
Weighted-average exercise price per share	$	12.49	$	19.36	$	16.00
Aggregate intrinsic value (in thousands)	$	2,183	$	1,372	$	3,555
Weighted-average contractual term (years)		4.5		8.6		6.6

The intrinsic value at exercise date for of options exercised during the years ended December 31, 2017, 2016 and 2015 was $118,000, $2.8 million and $160,000, respectively.

In November 2017, we granted 212,580 shares of restricted stock under the 2017 Plan to our directors, executive officers and certain key employees. The restricted stock grants to our directors will vest over the service period in equal increments over a two-year vesting period and the grants to our executive officers and employees vest in equal increments on an annual basis over a five‑year period. The market value of the Company’s common stock at the date of grant is used as the estimate of fair value of restricted stock.


	December 31, 2017
Restricted stock		Exercisable		Unvested		Outstanding
Number of shares underlying restricted stock		—		212,580		212,580
Weighted-average grant date fair value per share	$	—	$	27.27	$	27.27
Aggregate grant date fair value (in thousands)	$	—	$	5,797	$	5,797
Weighted-average contractual term (years)		—		4.4		4.4

The shares of the restricted stock are fully issued at the time of the grant and the grantee becomes the record owner of the restricted stock and has voting, dividend and other shareholder rights. The shares of restricted stock are non-transferable and subject to forfeiture until the restricted stock vests and any dividends with respect to the restricted stock are subject to the same restrictions, including the risk of forfeiture. At December 31, 2017, $11,000 was accrued for dividends payable to restricted stock holders. These dividends will be paid upon vesting of the restricted stock.

Stock-based compensation is recognized as compensation cost in the consolidated income statements based on the fair value on the date of grant over the required service period, generally defined as the vesting period. For the years ended December 31, 2017, 2016 and 2015, stock compensation expense was $329,000, $43,000 and $12,000, respectively.

As of December 31, 2017, there was approximately $6.2 million of total unrecognized compensation expense related to the stock‑based compensation arrangements, which is expected to be recognized over a weighted-average period of 3.1 years.