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Note 8 - Stock-Based Compensation
 3 Months Ended
Mar. 31, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 8. 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 March 31, 2015.


In February 2015, the Company awarded 77,370 shares of restricted stock to senior officers, directors and employees. The shares vest in three substantially equal installments beginning on the first anniversary of the date of grant.


In March 2015, the Company awarded 700 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 changes in shares pursuant to our equity compensation plans for the three months ended March 31, 2015 and 2014. The information excludes restricted stock units and awards.


   

Three Months Ended March 31,

 
   

2015

   

2014

 
   

Shares

   

Weighted-Average Exercise Price

   

Shares

   

Weighted-Average Exercise Price

 
                                 

Beginning balance

    757,183     $ 11.31       501,334     $ 10.34  

Issued

    -       -       21,000       32.77  

Exercised

    (280,425 )     12.40       (19,027 )     13.13  

Forfeited

    -       -       (110 )     5.76  

Expired

    (8,007 )     16.90       (408 )     9.37  

Ending balance

    468,751     $ 10.57       502,789     $ 11.18  

The following summarizes information about stock options outstanding at March 31, 2015. The information excludes restricted stock units and awards.


                                 

Weighted-Average

 
 

Outstanding:

           

Stock Options

   

Weighted-Average

   

Remaining

 
 

Range of Exercise Prices

   

Outstanding

   

Exercise Price

   

Contractual Life

 
  $ 5.76     $ 9.21       225,479     $ 5.76       3.78  
  $ 9.22     $ 15.47       173,907       11.83       2.83  
  $ 15.48     $ 22.66       37,774       19.11       8.29  
  $ 22.67     $ 32.36       31,591       27.69       4.26  
                    468,751     $ 10.57       3.82  

 

Exercisable:

           

Stock Options

   

Weighted-Average

 
 

Range of Exercise Prices

           

Exercisable

   

Exercise Price

 
  $ 5.76     $ 9.21       168,569     $ 5.76  
  $ 9.22     $ 15.47       166,467       11.88  
  $ 15.48     $ 22.66       32,494       19.43  
  $ 22.67     $ 32.36       21,191       25.40  
                    388,721     $ 10.59  

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 and 2013. There were no grants of stock options for the three months ended March 31, 2015.


   

Three Months Ended

   

Years Ended December 31,

 
   

2015

   

2014

   

2013

 

Expected volatility

 

N/A

      34.25 %     34.12 %

Weighted-Average volatility

 

N/A

      34.25 %     34.12 %

Expected dividends

    0.0 %     0.0 %     0.0 %

Expected term (in years)

 

N/A

      9.4       7.5  

Risk-free rate

 

N/A

      2.26 %     1.31 %

Weighted-average fair value (grant date)

 

N/A

    $ 13.49     $ 7.83  

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 period and the contractual term of the award.


The total intrinsic value of outstanding stock options and outstanding exercisable stock options was $10.8 million at March 31, 2015. The total intrinsic value of stock options exercised during the three months ended March 31, 2015 and 2014 was $6.0 million and $401 thousand, respectively. The total fair value of stock options vested was $79 thousand and $123 thousand for the three months ended March 31, 2015 and 2014, respectively. Unrecognized stock-based compensation expense related to stock options totaled $300 thousand at March 31, 2015. At such date, the weighted-average period over which this unrecognized stock option expense is expected to be recognized was 3.47 years.


The Company has unvested restricted stock award grants of 393,984 shares under the 2006 Plan at March 31, 2015. Unrecognized stock based compensation expense related to restricted stock awards totaled $9.3 million at March 31, 2015. At such date, the weighted-average period over which this unrecognized expense was expected to be recognized was 2.10 years. The following table summarizes the unvested restricted stock awards at March 31, 2015 and 2014.


   

Three Months Ended March 31,

 
   

2015

   

2014

 
   

Shares

   

Weighted-Average Grant Date Fair Value

   

Shares

   

Weighted-Average Grant Date Fair Value

 
                                 

Unvested at beginning

    509,336     $ 21.58       614,580     $ 18.71  

Issued

    78,070       36.06       78,947       33.24  

Forfeited

    (84 )     25.91       (434 )     15.67  

Vested

    (193,338 )     20.66       (181,967 )     17.59  

Unvested at end

    393,984     $ 24.90       511,126     $ 21.36  

Approved by shareholders in May 2011, the 2011 ESPP reserved 550,000 shares of common stock (as adjusted for stock dividends) 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 March 31, 2015, the 2011 ESPP had 447,453 shares remaining for issuance.


Included in salaries and employee benefits the Company recognized $1.1 million and $892 thousand in stock-based compensation expense for the three months ended March 31, 2015 and 2014, respectively. Stock-based compensation expense is recognized ratably over the requisite service period for all awards.