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Note 15 - Stock-Based Compensation

12 Months Ended

Dec. 31, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 15 – Stock-Based Compensation

The Company maintains the 1998 Stock Option Plan (“1998 Plan”), the 2006 Stock Plan (“2006 Plan”) and the 2011 Employee Stock Purchase Plan (“2011 ESPP”).

In connection with the acquisition of Fidelity, the Company assumed the Fidelity 2004 Long Term Incentive Plan and the 2005 Long Term Incentive Plan (the “Fidelity Plans”).

In connection with the acquisition of Virginia Heritage, the Company assumed the Virginia Heritage 2006 Stock Option Plan and the 2010 Long Term Incentive Plan (the “Virginia Heritage Plans”).

No additional options may be granted under the 1998 Plan, the Fidelity Plans or the Virginia Heritage Plans.

The 2006 Plan provides for the issuance of awards of incentive stock options, non-qualifying stock options, restricted stock and stock appreciation rights to selected key employees and members of the Board. As amended, 1,996,500 shares of common stock are subject to issuance pursuant to awards under the 2006 Plan. Stock options and restricted stock awards are made with an exercise price equal to the average of the high and low price of the Company’s shares at the date of grant.

For awards that are service based, compensation expense is being recognized over the service (vesting) period based on fair value, which for stock option grants is computed using the Black-Scholes model, and for restricted stock awards is based on the average of the high and low stock price of the Company’s shares on the date of grant. For awards that are performance-based, compensation expense is recorded based on the probability of achievement of the goals underlying the grant. No performance-based awards are outstanding at December 31, 2014.

In February 2014, the Company awarded three employees stock options to purchase 21,000 shares which have a ten-year term and vest in five substantially equal installments beginning on the first anniversary of the date of grant.

In February 2014, the Company awarded 58,187 shares of restricted stock to senior officers and employees. The shares vest in three substantially equal installments beginning on the first anniversary of the date of grant.

In March 2014, the Company awarded 20,760 shares of restricted stock to directors. The shares vest in three substantially equal installments beginning on the first anniversary of the date of grant.

On October 31, 2014, in connection with the Merger, the Company assumed the outstanding options under the Virginia Heritage Plans, which were converted into fully vested options to acquire 401,497 shares of the Company’s common stock at exercise prices ranging from $9.22 to $22.70 per share and terms ranging from twenty-five months to one-hundred-twelve months.

In November 2014, the Company awarded 8,680 shares of restricted stock to a senior officer and an employee. The shares vest in two substantially equal installments on the first and second anniversary from the date of grant.

In December 2014, the Company awarded 300 shares of restricted stock to an employee. The shares vest in five substantially equal installments beginning on the first anniversary of the date of grant.

Below is a summary of stock option activity for the twelve months ended December 31, 2014, 2013 and 2012. The information excludes restricted stock units and awards.

	2014					2013					2012
	Shares			Weighted-Average Exercise Price		Shares			Weighted-Average Exercise Price		Shares			Weighted-Average Exercise Price

Beginning balance		501,334		$	10.34		722,155		$	10.18		919,371		$	10.23
Issued		21,000			32.77		3,300			20.03		5,500			15.48
Assumed from
Virginia Heritage		401,497			13.16		-			-		-			-
Exercised		(157,313	)		14.71		(198,588	)		9.99		(167,882	)		10.01
Forfeited		(8,110	)		33.06		(2,420	)		7.40		(3,493	)		6.22
Expired		(1,225	)		9.00		(23,113	)		10.05		(31,341	)		13.92
Ending balance		757,183		$	11.31		501,334		$	10.34		722,155		$	10.18

The following summarizes information about stock options outstanding at December 31, 2014. The information excludes restricted stock units and awards.

Outstanding:		Stock Options Outstanding		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life
Range of Exercise Prices
$	5.76 $ 9.22		249,788	$	5.95		3.73
$	9.22 $ 15.47		365,467		11.18		1.74
$	15.48 $ 24.41		119,052		19.57		3.50
$	24.42 $ 32.36		22,876		28.94		5.85
			757,183	$	11.31		2.80

Exercisable:		Stock Options Exercisable		Weighted-Average Exercise Price
Range of Exercise Prices
$	5.76 $ 9.22		192,878	$	6.00
$	9.22 $ 15.47		348,429		11.20
$	15.48 $ 24.41		113,112		19.68
$	24.42 $ 32.36		9,876		24.43
			664,295	$	11.33

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model with the assumptions as shown in the table below used for grants during the years ended December 31, 2014, 2013 and 2012.

	Years Ended December 31,
	2014			2013			2012
Expected volatility		34.25	%		34.12	%		36.64	%
Weighted-Average volatility		34.25	%		34.12	%		36.64	%
Expected dividends		0.0	%		0.0	%		0.0	%
Expected term (in years)		9.4			7.5			7.5
Risk-free rate		2.26	%		1.31	%		1.13	%
Weighted-average fair value (grant date)	$	13.49		$	7.83		$	6.35
Weighted-average fair value (grant date) for VHB options assumed	$	24.89		n/a			n/a

The expected lives are based on the “simplified” method allowed by ASC Topic 718“Compensation,” whereby the expected term is equal to the midpoint between the vesting date and the end of the contractual term of the award.

The total intrinsic value of outstanding stock options and outstanding exercisable stock options was $18.5 million and $10.2 million, respectively, at December 31, 2014 and 2013. The total intrinsic value of stock options exercised during the years ended December 31, 2014, 2013 and 2012 was $3.2 million, $3.1 million and $1.1 million, respectively. The total fair value of stock options vested was $10.1 million (including $10.0 million of stock options assumed from Virginia Heritage), $133 thousand and $136 thousand for 2014, 2013 and 2012, respectively. Unrecognized stock-based compensation expense related to stock options totaled $324 thousand at December 31, 2014. At such date, the weighted-average period over which this unrecognized expense was expected to be recognized was 3.67 years.

Cash proceeds, tax benefits and intrinsic value related to total stock options exercised is as follows:

	Years Ended December 31,
(dollars in thousands)	2014		2013		2012

Proceeds from stock options exercised	$	2,313	$	1,984	$	1,685
Tax benefits related to stock options exercised		978		410		369
Intrinsic value of stock options exercised		3,184		3,060		1,100

The Company has unvested restricted stock award grants of 509,336 shares from the 2006 Plan at December 31, 2014. Unrecognized stock based compensation expense related to restricted stock awards totaled $7.6 million at December 31, 2014. At such date, the weighted-average period over which this unrecognized expense was expected to be recognized was 2.0 years. The following table summarizes the unvested restricted stock awards at December 31, 2014 and 2013:

	Years Ended December 31,
	2014					2013
	Shares			Weighted-Average Grant Date Fair Value		Shares			Weighted-Average Grant Date Fair Value

Unvested at beginning		614,580		$	18.71		348,350		$	13.79
Issued		87,927			33.50		424,450			20.64
Forfeited		(8,250	)		25.28		(1,318	)		15.73
Vested		(184,921	)		17.54		(156,902	)		13.04
Unvested at end		509,336		$	21.58		614,580		$	18.71

Approved by shareholders in May 2011, the 2011 ESPP reserved 550,000 shares of common stock for issuance to employees. Whole shares are sold to participants in the plan at 85% of the lower of the stock price at the beginning or end of each quarterly offering period. The 2011 ESPP is available to all eligible employees who have completed at least one year of continuous employment, work at least 20 hours per week and at least five months a year. Participants may contribute a minimum of $10 per pay period to a maximum of $6,250 per offering period or $25,000 annually (not to exceed more than 10% of compensation per pay period). At December 31, 2014, the 2011 ESPP had 453,606 shares remaining for issuance.

Included in salaries and employee benefits the Company recognized $4.1 million, $3.4 million and $2.6 million in stock-based compensation expense (including the ESPP) for 2014, 2013 and 2012, respectively. Stock-based compensation expense is recognized ratably over the requisite service period for all awards.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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