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Note 14 - Stock Based Compensation

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Text Block]

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 $15,000 in 2020, $53,000 in 2019, and $38,000 in 2018. 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, 2020, there were 92,482 shares available for future grants.

A summary of stock options activity during the year ended December 31, 2020 was as follows:

				Weighted		Weighted
				average		average
				exercise		Grant Date
	Shares			price		Fair Value

Options outstanding at January 1, 2020		57,748		$	23.39	$	3.36
Options granted		-			-
Options exercised		(35,617	)		22.33		3.31
Options forfeited or expired		(1,500	)		27.25		3.64
Options outstanding, end of year		20,631		$	25.30	$	3.46


Options exercisable at December 31, 2020		8,631		$	22.60	$	3.22

The exercise prices for options outstanding and exercisable at the end of 2020 ranged from $20.86 to $27.25 per share. The weighted average remaining contractual life of options outstanding and exercisable at the end of 2020 was approximately 6.4 years.

The intrinsic value of all outstanding stock options and exercisable stock options was $82,000 and $71,000 respectively, at December 31, 2020 and December 31, 2019. The aggregate intrinsic values of outstanding and exercisable options at December 31, 2020 were calculated based on the closing market price of the Company’s common stock on December 31, 2020 of $30.81 per share less the exercise price. The grant date fair value of stock options granted in 2019 was $49,000.

Information pertaining to options outstanding at December 31, 2020 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)
$	27.25		12,000		-		8.45
$	25.65		3,000		3,000		7.53
$	20.86		3,306		3,306		6.38
$	21.13		2,325		2,325		5.03

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, 2020, there was $19,000 in unrecognized compensation expense related to stock options.

There were no stock options granted in 2020.

ChoiceOne has granted restricted stock units to a select group of employees under the Stock Incentive Plan of 2012. Beginning with the awards granted in April 2019, restricted stock units vest on the three year anniversary 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 $157,000, $349,000, and $244,000 in 2020, 2019, and 2018, respectively, in connection with restricted stock units for current participants during these years.

A summary of the activity for restricted stock units outstanding during the year ended December 31, 2020 is presented below:

Outstanding Stock Awards	Shares			Per Share
Outstanding at January 1, 2020		9,000		$	27.25
Granted		10,539			29.00
Vested		(550	)		28.05
Forfeited		-			-
Outstanding at December 31, 2020		18,989		$	28.20

At December 31, 2020, there were 18,989 restricted stock units outstanding with an approximate stock value of $585,000 based on ChoiceOne’s December 31, 2020 stock price. At December 31, 2019, there were 9,000 restricted stock units outstanding with an approximate stock value of $288,000 based on ChoiceOne’s December 31, 2019 stock price. As a result of the merger with County, all unvested stock awards granted prior to October 1, 2019 vested upon completion of the merger. The grant date fair value of stock issued was $306,000 and $270,000 in 2020 and 2019, respectively. The cost is expected to be recognized over a weighted average period of 1.84 years. As of December 31, 2020, there was $337,000 of unrecognized compensation cost related to unvested shares granted.