Stock-based Payment Arrangements

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

The Company’s shareholders approved the 2009 Stock Option Plan (the “SOP”) and the 2009 Recognition and Retention Plan (the “RRP”) on May 12, 2009 to provide incentives and awards for directors, officers, and other key employees of the Company and its subsidiary. A maximum of 892,687 shares of Company common stock were reserved for issuance upon the exercise of options granted under the SOP. A total of 357,075 shares of the Company’s outstanding common stock, or 4% of total shares outstanding at the time the RRP was implemented, were approved for restricted stock awards under the RRP. The SOP and RRP expired February 2019. Expiration of the SOP and RRP did not affect any unvested options or awards granted. On May 6, 2014, the Company’s shareholders approved the 2014 Equity Incentive Plan (the “2014 Plan”). The 2014 Plan authorizes the granting of stock options, restricted stock units and other awards to directors, officers and other key employees. The aggregate number of shares of our common stock reserved and available for issuance pursuant to awards granted under the 2014 Plan is 350,000. These plans are administered by a committee appointed by the Board of Directors, which selects persons eligible to receive awards and determines the number of shares and/or options subject to each award, the terms, conditions and other provisions of the awards. In accordance with ASC 718, the Company adopted a fair value based method of accounting for employee stock compensation plans, whereby compensation cost is measured as of the grant date based on the fair value of the award and is recognized over the service period, which is usually the vesting period.

Stock Option Plans

The Company has issued stock options under the SOP and the 2014 Plan to directors, officers and other key employees. The option exercise price cannot be less than the fair value of the underlying common stock as of the date of the option grant and the maximum option term cannot exceed ten years. All stock options granted have been issued with vesting periods of five years with accelerated vesting provided under certain circumstances. As of December 31, 2019, options to acquire an aggregate of 180,530 shares were outstanding under the SOP and the 2014 Plan.

The fair value of each option granted is estimated on the grant date using the Black-Scholes option pricing model. This model requires management to make certain assumptions, including the expected life of the option, the risk-free rate of interest, the expected volatility and the expected dividend yield. The following assumptions were made in estimating 2019 fair values:


Expected dividends	2.34	%
Expected volatility	21.44	%
Risk-free interest rate	2.2	%
Expected term (in years)	6.5

As of December 31, 2019, there was $524,000 of unrecognized compensation cost related to stock options which is expected to be recognized over a period of 3.3 years.

For the years ended December 31, 2019, 2018 and 2017, the Company recognized $200,000, $168,000 and $162,000, respectively, in compensation cost related to stock options, which is included in compensation and benefits expense in the accompanying consolidated statements of income.

The following table represents stock option activity for the years indicated.


Options	Number of Options	Weighted- Average Exercise Price		Weighted- Average Grant Date Fair Value		Weighted- Average Remaining Contractual Term (Years)
Outstanding as of December 31, 2016	484,688	$	14.55	$	4.17
Granted	28,290	35.25		7.14
Exercised	(103,240)	11.73		3.81
Forfeited	(1,260)	30.56		5.95
Outstanding as of December 31, 2017	408,478	$	16.64	$	4.46	3.7
Granted	28,790	44.88		10.35
Exercised	(83,348)	12.90		3.99
Forfeited	(1,550)	28.34		5.59
Outstanding as of December 31, 2018	352,370	$	19.78	$	5.05	3.6
Granted	37,780	35.78		6.52
Exercised	(198,786)	12.52		3.85
Forfeited	(10,834)	33.13		6.79
Outstanding as of December 31, 2019	180,530	$	30.32	$	6.57	6.6
Exercisable as of December 31, 2017	315,912	$	13.23	$	4.09	2.3
Exercisable as of December 31, 2018	258,319	14.65		4.27		2.0
Exercisable as of December 31, 2019	86,401	24.73		5.94		5.1

Restricted Stock Plans

The Company has issued restricted stock under the RRP to directors, officers and other key employees. During 2009, the Company purchased in the open market all shares required to fund the RRP at an average cost of $11.81 per share. As of December 31, 2019, the cost of such shares held by the RRP totaled $35,000, which is included in the Company’s unallocated common stock held by the RRP in the consolidated statements of financial condition. Under the 2014 Plan, the Company may issue restricted stock units, restricted stock awards, options and other awards.

Awards under the RRP and the 2014 Plan may not be sold or otherwise transferred until certain restrictions have lapsed. The unearned compensation related to these awards is amortized to compensation expense over the five-year vesting period. The total share-based compensation expense for these awards is determined based on the market price of the Company’s common stock as of the date of grant applied to the total number of shares granted and is amortized over the vesting period. As of December 31, 2019, unearned share-based compensation associated with these awards totaled $1,437,000.

For the years ended December 31, 2019, 2018 and 2017, the Company recognized $602,000, $573,000 and $354,000, respectively, in compensation cost related to restricted stock and restricted stock units, which is included in compensation and benefits expense in the accompanying consolidated statements of income.

The following table represents unvested restricted stock activity for the years indicated.


Restricted Stock	Number of Shares	Weighted-Average Grant Date Fair Value
Balance, December 31, 2016	48,557	$	24.89
Granted	18,660	37.02
Forfeited	(400)	28.84
Released	(12,182)	23.76
Balance, December 31, 2017	54,635	$	29.26
Granted	16,345	44.88
Forfeited	(195)	30.79
Released	(15,405)	27.46
Balance, December 31, 2018	55,380	$	34.36
Granted	18,745	35.84
Forfeited	(4,251)	36.01
Released	(18,711)	31.79
Balance, December 31, 2019	51,163	$	35.71