Note 11 – Stock Based Compensation

The Company’s 2016 Incentive Plan (‘‘Plan’’), approved by the Company’s stockholders in June 2016, permits the Company to grant, among other things, stock options, restricted stock, RSUs, performance share awards and dividend equivalent rights and any one or more of the foregoing to its employees, officers, directors and consultants. A maximum of 750,000 shares of the Company’s common stock is authorized for issuance pursuant to this Plan. As of March 31, 2019, (i) restricted stock awards with respect to 434,900 shares had been issued, of which 300 shares were forfeited and 3,000 shares had vested, and (ii) as further described below, RSUs with respect to 152,500 shares had been issued and are outstanding.

Under the Company’s 2012 Incentive Plan, as of March 31, 2019, 500,700 shares had been issued, of which 3,550 shares were forfeited and 239,600 shares had vested. No additional awards may be granted under this plan.

For accounting purposes, the restricted stock is not included in the shares shown as outstanding on the balance sheet until they vest; however, dividends are paid on the unvested shares. The restricted stock grants are charged to General and administrative expense over the respective vesting periods based on the market value of the common stock on the grant date. Unless earlier forfeited because the participant’s relationship with the Company terminated, unvested restricted stock awards vest on the fifth anniversary of the grant date, and under certain circumstances may vest earlier.

In each of 2017 and 2018, the Company granted RSUs exchangeable for up to 76,250 shares of common stock upon satisfaction, through June 30, 2020 and June 30, 2021, respectively, of specified conditions. Specifically, up to 50% of these RSUs vest upon achievement of metrics related to average annual total stockholder return (the “TSR Awards”), which metrics meet the definition of a market condition, and up to 50% vest upon achievement of metrics related to average annual return on capital (the “ROC Awards”), which metrics meet the definition of a performance condition. The holders of the RSUs are not entitled to dividends or to vote the underlying shares until such RSUs vest and shares are issued. Accordingly, the shares underlying these RSUs are not included in the shares shown as outstanding on the balance sheet. For the TSR awards, a third party appraiser prepared a Monte Carlo simulation pricing model to determine the fair value, which is recognized ratably over the service period. For the ROC Awards, the fair value is based on the market value on the date of grant and the performance assumptions are re-evaluated quarterly. Expense is not recognized on the RSUs which the Company does not expect to vest as a result of the Company's performance expectations.

As of March 31, 2019, based on performance and market assumptions, the fair value of the RSUs granted in 2017 and 2018 is $864,000 and $858,000, respectively. Recognition of such deferred compensation expense will be charged to General and administrative expense over the respective three year performance cycle. None of these RSUs were forfeited or vested during the three months ended March 31, 2019.

The following is a summary of the activity of the equity incentive plans:


	Three Months Ended
	March 31,
	2019		2018
Restricted stock grants:
Number of shares		150,050		144,750
Average per share grant price	$	25.70	$	25.31
Deferred compensation to be recognized over vesting period	$	3,856,000	$	3,664,000

Number of non-vested shares:
Non-vested beginning of period		651,250		612,900
Grants		150,050		144,750
Vested during period		(112,150)		(106,000)
Forfeitures		—		—
Non-vested end of period		689,150		651,650

RSU grants:
Number of underlying shares		—		—
Average per share grant price		—		—
Deferred compensation to be recognized over vesting period		—		—

Number of non-vested shares:
Non-vested beginning of period		152,500		76,250
Grants		—		—
Vested during period		—		—
Forfeitures		—		—
Non-vested end of period		152,500		76,250

Restricted stock and RSU grants:
Weighted average per share value of non-vested shares (based on grant price)	$	24.60	$	23.56
Value of stock vested during the period (based on grant price)	$	2,304,000	$	2,289,000
Weighted average per share value of shares forfeited during the period (based on grant price)	$	—	$	—

The total charge to operations:
Outstanding restricted stock grants	$	843,000	$	735,000
Outstanding RSUs		111,000		91,000
Total charge to operations	$	954,000	$	826,000

As of March 31, 2019, total compensation costs of $9,828,000 and $1,035,000 related to non-vested restricted stock awards and RSUs, respectively, have not yet been recognized. These compensation costs will be charged to General and administrative expense over the remaining respective vesting periods. The weighted average remaining vesting period is 2.9 years for the restricted stock and 1.8 years for the RSUs.