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Stock Based Compensation | 12 Months Ended
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Dec. 31, 2015
Stock-Based Compensation [Abstract] |
STOCK BASED COMPENSATION | NOTE 11 - STOCK BASED COMPENSATION The Company’s shareholders approved the Norwood Financial Corp 2006 Stock Option Plan at the Annual Meeting on April 26, 2006. An aggregate of 275,000 shares of authorized but unissued Common Stock of the Company were reserved for future issuance under the Plan. This includes up to 44,000 shares for awards to outside directors. Under this plan, the Company granted 7,423 options to employees in 2015, 12,500 options to employees in 2014, and 28,600 options, which included 4,000 options granted to outside directors in 2013. As of December 31, 2015, there were 4,057 shares available for stock option awards to outside directors. At the Annual Meeting held on April 22, 2014, the Company’s shareholders approved the Norwood Financial Corp 2014 Equity Incentive Plan. An aggregate of 250,000 shares of authorized but unissued Common Stock of the Company were reserved for future issuance under the Plan. This includes up to 40,000 shares for awards to outside directors. The Plan also authorized the Company to award restricted stock to officers and outside directors, limited to 42,000 shares of restricted stock awards for officers and 8,000 shares of restricted stock awards for outside directors. Under this plan, the Company granted 13,727 shares in 2015 which included 7,077 options to employees, 4,250 shares of restricted stock to officers and 2,400 shares of restricted stock to directors. In 2014, the Company granted 9,300 shares, which included 2,800 shares to outside directors. All shares granted in 2014 were for restricted stock. The restricted shares vest over a five-year period. The product of the number of shares granted and the grant date market price of the Company’s common stock determine the fair value of restricted stock under the company’s restricted stock plan. Management recognizes compensation expense for the fair value of restricted stock on a straight-line basis over the requisite service period for the entire award. As of December 31, 2015, there were 226,973 shares available for future awards under this plan, which includes 192,173 shares available for officer awards and 34,800 shares available for awards to outside directors. Included in these totals are 31,250 shares available for restricted stock awards to officers and 2,800 shares available for restricted stock awards to outside directors. Total unrecognized compensation cost related to stock options was $71,000 as of December 31, 2015, $66,000 as of December 31, 2014, and $157,000 as of December 31, 2013. Salaries and employee benefits expense includes $66,000, $154,000 and $162,000 of compensation costs related to options for the years ended December 31, 2015, 2014 and 2013, respectively. Compensation costs related to restricted stock amounted to $55,000, $0 and $0 for the years ended December 31, 2015, 2014 and 2013, respectively. The expected future compensation expense relating to non-vested restricted stock outstanding as of December 31, 2015 and 2014 was $398,000 and $271,000 respectively. Net income was reduced by $92,000, $146,000 and $154,000 for the years ended December 31, 2015, 2014 and 2013, respectively. A summary of the Company’s stock option activity and related information for the years ended December 31 follows:
| 2015 |  | 2014 |  | 2013
|  |  | Weighted |  |  |  |  |  | Weighted |  |  |  |  |  | Weighted |  |  |
|  |  | Average |  | Average |  |  |  | Average |  | Average |  |  |  | Average |  | Aggregate
|  |  | Exercise |  | Intrinsic |  |  |  | Exercise |  | Intrinsic |  |  |  | Exercise |  | Intrinsic
| Options |  | Price |  | Value |  | Options |  | Price |  | Value |  | Options |  | Price |  | Value
Outstanding, beginning of year | 206,463 |  | $ | 26.74 |  |  |  |  | 219,540 |  | $ | 26.64 |  |  |  |  | 225,670 |  | $ | 26.27 |  |  |
Granted | 14,500 |  |  | 28.55 |  |  |  |  | 12,500 |  |  | 29.08 |  |  |  |  | 28,600 |  |  | 27.07 |  |  |
Exercised | (16,859) |  |  | 26.19 |  |  |  |  | (25,577) |  |  | 27.05 |  |  |  |  | (24,127) |  |  | 23.83 |  |  |
Forfeited | (9,583) |  |  | 27.02 |  |  |  |  | - |  |  | - |  |  |  |  | (10,603) |  |  | 28.92 |  |  |
Outstanding, end of year | 194,521 |  | $ | 26.91 |  | $ | 362,754 |  | 206,463 |  | $ | 26.74 |  | $ | 477,640 |  | 219,540 |  | $ | 26.64 |  | $ | 146,970
Exercisable, end of year | 180,021 |  | $ | 26.78 |  | $ | 359,854 |  | 193,963 |  | $ | 26.59 |  | $ | 477,640 |  | 190,940 |  | $ | 26.58 |  | $ | 146,900
Exercise prices for options outstanding as of December 31, 2015 ranged from $24.44 to $29.08 per share. The weighted average remaining contractual life is 5.2 years. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing with the following weighted average assumptions:
| Years Ended December 31,
| 2015 |  | 2014 |  | 2013
Dividend yield |  | 3.77% |  |  | 3.57% |  |  | 3.49%
Expected life |  | 10 years |  |  | 10 years |  |  | 10 years
Expected volatility |  | 24.35% |  |  | 24.97% |  |  | 25.91%
Risk-free interest rate |  | 2.28% |  |  | 2.17% |  |  | 3.01%
Weighted average fair value of options granted | $ | 4.89 |  | $ | 5.30 |  | $ | 5.72
The expected volatility is based on historical volatility. The risk-free interest rates for periods within the contractual life of the awards are based on the U.S. Treasury yield curve in effect at the time of the grant. The expected life is based on historical exercise experience. The dividend yield assumption is based on the Company’s history and expectation of dividend payouts. Proceeds from stock option exercises totaled $441,000 in 2015. Shares issued in connection with stock option exercises are issued from available treasury shares. If no treasury shares are available, new shares are issued from available authorized shares. During 2015, all the shares issued in connection with stock option exercises, 16,859 shares in total, were issued from available treasury shares. All share and per share data have been adjusted to give retroactive effect to the 10% stock dividend declared in 2013. As of December 31, 2015, outstanding stock options consist of the following:
|  |  | Average |  |  |  |  |  | Average
| Options |  | Exercise |  | Remaining |  | Options |  | Exercise
| Outstanding |  | Price |  | Life, Years |  | Exercisable |  | Price
| 16,174 |  |  | 27.62 |  | 0.3 |  | 16,174 |  |  | 27.62
| 15,400 |  |  | 28.64 |  | 1.0 |  | 15,400 |  |  | 28.64
| 15,400 |  |  | 28.41 |  | 2.0 |  | 15,400 |  |  | 28.41
| 15,400 |  |  | 25.00 |  | 3.0 |  | 15,400 |  |  | 25.00
| 14,397 |  |  | 25.99 |  | 4.0 |  | 14,397 |  |  | 25.99
| 1,100 |  |  | 24.44 |  | 4.2 |  | 1,100 |  |  | 24.44
| 18,700 |  |  | 25.25 |  | 5.0 |  | 18,700 |  |  | 25.25
| 22,200 |  |  | 24.97 |  | 6.0 |  | 22,000 |  |  | 24.97
| 23,100 |  |  | 27.05 |  | 7.0 |  | 23,100 |  |  | 27.05
| 1,100 |  |  | 27.55 |  | 7.0 |  | 1,100 |  |  | 27.55
| 2,000 |  |  | 28.95 |  | 7.7 |  | 2,000 |  |  | 28.95
| 23,250 |  |  | 26.90 |  | 8.0 |  | 23,250 |  |  | 26.90
| 12,000 |  |  | 29.08 |  | 9.0 |  | 12,000 |  |  | 29.08
| 14,500 |  |  | 28.55 |  | 10.0 |  | - |  |  | -
Total | 194,521 |  |  |  |  |  |  | 180,021 |  |  |
A summary of the Company’s restricted stock activity and related information for the years ended December 31 is as follows:
|  | 2015 |  | 2014
|  |  |  | Weighted-Average |  |  |  | Weighted-Average
|  | Number of |  | Grant Date |  | Number of |  | Grant Date
|  | Shares |  | Fair Value |  | Shares |  | Fair Value
Non-vested, beginning of year |  | 9,300 |  | $29.08 |  | - |  | $0.00
Granted |  | 6,650 |  | 28.55 |  | 9,300 |  | 29.08
Vested |  | (1,860) |  | 29.08 |  | - |  | -
Forfeited |  | (280) |  | 29.08 |  | - |  | -
Non-vested at December 31 |  | 13,810 |  | $28.82 |  | 9,300 |  | $29.08

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- Definition The entire disclosure for accounts comprising shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income, and compensation-related costs for equity-based compensation. Includes, but is not limited to, disclosure of policies, compensation plan details, equity-based arrangements to obtain goods and services, deferred compensation arrangements, and employee stock purchase plan details. + References No definition available. + Details
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