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Stock-Based Compensation

12 Months Ended

Dec. 31, 2018

Stock-Based Compensation [Abstract]

Stock-Based Compensation

NOTE 20 – Stock-Based Compensation

Compensation cost is recognized for stock options and restricted stock awards issued to employees and non-employee directors. Compensation cost is measured as the fair value of these awards on their date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used as the fair value of restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period for stock option and restricted stock awards.

The Company’s stock incentive programs are long-term retention programs intended to attract, retain, and provide incentives for key employees and non-employee directors in the form of incentive and non-qualified stock options and restricted stock.

Stock-based compensation expense was recorded as follows:


		For the years ended December 31,
(dollars in thousands)			2018		2017		2016
Stock option expense		$	1,183		959		746
Restricted stock grant expense			319		299		286
Total stock-based compensation expense		$	1,502		1,258		1,032

Stock Options
On May 18, 2010, the Company adopted the 2010 Incentive Plan, making available for issuance 366,025 stock options (adjusted for the 10% stock dividends in 2013, 2012, and 2011). The options may be exercised at an exercise price per share based on the fair market value and determined on the date of grant and expire 10 years from the grant date. On May 20, 2014, the Company amended the 2010 Incentive Plan to add an additional 200,000 shares of common stock to be issuable as stock options, for a total of 566,025 shares. As of December 31, 2018, there were 14,375 options available for grant under the 2010 Incentive Plan.

On May 17, 2016, the Company adopted the 2016 Equity Incentive Plan, making available for issuance 400,000 stock options. The options may be exercised at an exercise price per share based on the fair market value and determined on the date of grant and expire 10 years from the grant date. As of December 31, 2018, there were 255,715 options available for grant under the 2016 Equity Incentive Plan.

A summary of the status of the stock option plan and changes for the period is presented below:


		For the years ended December 31,
								2018								2017								2016
								Weighted								Weighted								Weighted
					Weighted			Average					Weighted			Average					Weighted			Average
					average			Remaining					average			Remaining					average			Remaining
					exercise			Contractual					exercise			Contractual					exercise			Contractual
		Shares			price			Life		Shares			price			Life		Shares			price			Life
Outstanding at beginning of year		662,841			$	15.70				642,203			$	11.77				693,954			$	8.94
Granted		93,200				43.32				110,950				35.34				109,500				23.65
Exercised		(105,630	)			8.51				(74,437	)			9.48				(152,751	)			7.19
Forfeited or expired		(3,600	)			40.03				(15,875	)			23.49				(8,500	)			15.69
Outstanding at end of year		646,811			$	20.71		5.6 years		662,841			$	15.70		5.6 years		642,203			$	11.77		5.9 years
Options exercisable at year-end		404,851			$	12.58		4.0 years		419,766			$	9.20		4.1 years		399,256			$	7.62		4.4 years
Weighted average fair value of options granted during the year					$	16.83							$	14.14							$	10.96
Shares available for grant		270,090								359,690								454,765

The aggregate intrinsic value (the difference between the Company’s closing stock price on the last trading day of the year and the exercise price, multiplied by the number of in-the-money options) of 646,811 and 662,841 stock options outstanding at December 31, 2018 and 2017 was $8.7 million and $16.9 million, respectively. The aggregate intrinsic value of 404,851 and 419,766 stock options exercisable at December 31, 2018 and 2017 was $8.0 million and $13.5 million, respectively.

The fair value of the option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The following assumptions were used for grants:


		2018		2017		2016
Dividend yield		-		-		-
Expected life		7 years		7 years		7 years
Expected volatility		32.08%		34.63%		43.22%
Risk-free interest rate		2.50%		2.04%		1.65%

At December 31, 2018, there was $2.3 million of total unrecognized compensation cost related to nonvested stock option grants. The cost is expected to be recognized over a weighted-average period of 2.5 years. The fair value of stock option grants that vested during 2018, 2017, and 2016 was $973,000, $775,000 and $593,000, respectively.

Restricted Stock Grants
On May 18, 2010, the Company adopted the 2010 Incentive Plan which included a provision for the issuance of 79,860 shares of restricted stock (adjusted for all subsequent stock dividends). On May 19, 2015, the Company amended the 2010 Incentive Plan to add an additional 25,000 shares of common stock to be issuable as restricted stock grants, for a total of 104,860 shares. As of December 31, 2018, all shares of restricted stock, authorized under the plan had been granted.

On May 17, 2016, the Company adopted the 2016 Equity Incentive Plan which included a provision for the issuance of 50,000 shares of common stock to be issuable as restricted stock grants. As of December 31, 2018, 46,424 of restricted stock were available for grant.

Shares of restricted stock granted to employees under the stock plans are subject to restrictions as to continuous employment for a specified time period following the date of grant. During this period, the holder is entitled to full voting rights and dividends.

A summary of the status of the Company’s nonvested restricted stock and changes for the years ended December 31, 2018, 2017, and 2016 is as follows:


		December 31,
		2018						2017						2016
					Weighted						Weighted						Weighted
					Average						Average						Average
		Restricted			Grant-Date			Restricted			Grant-Date			Restricted			Grant-Date
		Shares			Fair Value			Shares			Fair Value			Shares			Fair Value
Nonvested at beginning of year		25,000			$	26.43		36,125			$	20.13		33,749			$	12.92
Granted		13,000				42.87		6,500				35.14		22,000				23.91
Vested		(8,375	)			25.17		(17,625	)			16.73		(17,749	)			11.68
Forfeited		-				-		-				-		(1,875	)			14.72
Nonvested at end of year		29,625			$	34.00		25,000			$	26.43		36,125			$	20.13

At December 31, 2018, there was $741,000 of total unrecognized compensation cost related to nonvested restricted stock grants. The cost is expected to be recognized over a weighted-average period of 2.6 years.