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Stock Based Compensation

12 Months Ended

Dec. 31, 2018

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

Stock Based Compensation

Note 14 - Stock Based Compensation

Options to buy stock have been granted to key employees to provide them with additional equity interests in ChoiceOne. Compensation expense in connection with stock options granted was $38,000 in 2018, $49,000 in 2017, and $71,000 in 2016. The Stock Incentive Plan of 2012 was approved by the Company’s shareholders at the Annual Meeting held on April 25, 2012. The Stock Incentive Plan of 2012, as amended effective May 23, 2018, provides for the issuance of up to 200,000 shares of common stock. At December 31, 2018, there were 95,771 shares available for future grants.

A summary of stock options activity was as follows:

		Shares				Weighted average exercise price

Options outstanding at January 1, 2018			47,250			$	22.32
Options granted prior to stock dividend			—				—
Options exercised prior to stock dividend			—				—
Options forfeited or expired prior to stock dividend			—				—
Options outstanding prior to stock dividend			47,250			$	22.32

Options outstanding after 5% stock dividend*			49,613			$	21.26
Options exercised after stock dividend			(6,484	)			21.08
Options granted after stock dividend			15,000				25.65
Options outstanding at December 31, 2018			58,129			$	22.41

Options exercisable at December 31, 2018			38,612			$	21.52

* The 2018 balance was adjusted for the 5% stock dividend paid on May 31, 2018.

The exercise prices for options outstanding and exercisable at the end of 2018 ranged from $20.86 to $25.65 per share. The weighted average remaining contractual life of options outstanding and exercisable at the end of 2018 was approximately 6.4 years.

The intrinsic value of all outstanding in-the-money stock options and exercisable in-the-money stock options was $106,000 and $31,000 respectively, at December 31, 2018. The aggregate intrinsic values of outstanding and exercisable options at December 31, 2018 were calculated based on the closing market price of the Company’s common stock on December 31, 2018 of $25.00 per share less the exercise price.

Information pertaining to options outstanding at December 31, 2018 was as follows:

Exercise price of stock options:			Number of options outstanding at year-end				Number of options exercisable at year- end				Average remaining contractual life (in years)
$25.65				15,000				3,750				9.42
$20.86				15,707				7,440				8.68
$21.13				27,422				27,422				5.31

The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model. ChoiceOne uses historical data to estimate the volatility of the market price of ChoiceOne stock and employee terminations within the valuation model. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. As of December 31, 2018, there was $43,000 in unrecognized compensation expense related to stock options issued in 2017 and 2018.

The fair value of stock options granted during 2018 was $63,000, which was determined using the following weighted-average assumptions as of the grant date.

Risk-free interest rate			2.89	%
Expected option life			5.75 years
Expected stock price volatility			20.79	%
Dividend yield			3.04	%
Fair value of options granted		$	4.17

ChoiceOne has granted restricted stock units to a select group of employees under the Stock Incentive Plan of 2012. Restricted stock units vest in three annual installments on each of the next three anniversaries of the grant date. Certain additional vesting provisions apply. Each restricted stock unit, once vested, is settled by delivery of one share of ChoiceOne common stock. ChoiceOne recognized compensation expense of $244,000, $191,000, and $207,000 in 2018, 2017, and 2016, respectively, in connection with restricted stock units for current participants during these years.

A summary of the activity for RSU’s during the year ended December 31, 2018 is presented below:

Outstanding Stock Awards		Shares				Weighted Average Grant Date Fair Value Per Share
Outstanding at January 1, 2018			18,060			$	23.14
Granted			10,900				26.00
Vested			(9,536	)			23.15
Impact of stock dividend paid May 31, 2018			1,016				24.71
Outstanding at December 31, 2018			20,440				24.74

At December 31, 2018, there were 20,440 restricted stock units outstanding with an approximate stock value of $511,000 based on ChoiceOne’s December 31, 2018 stock price. At December 31, 2017, there were 18,060 restricted stock units outstanding with an approximate stock value of $430,000 based on ChoiceOne’s December 31, 2017 stock price.