11.	STOCK AWARDS

In accordance with Bancshares’

2013

Incentive Plan, stock awards, including stock options and restricted stock, have been granted to certain employees and non-employee directors. Shares of common stock available for distribution to satisfy the grants

may

consist, in whole or in part, of authorized and unissued shares, treasury shares or shares reacquired by the Company in any manner. Stock-based compensation expense related to stock awards totaled

$0.2

million and

$0.1

million for the

nine

-month periods ended

September 30, 2017

and

2016,

respectively.

Stock Options

The stock option awards were granted with an exercise price equal to the market price of Bancshares’ common stock on the date of the grant and have vesting periods ranging from

one

three

years, with

-year contractual terms.

The Company recognizes the cost of services received in exchange for stock option awards based on the grant date fair value of the award, with compensation expense recognized on a straight-line b

asis over the award’s vesting period. The fair value of outstanding awards was determined using the Black-Scholes option pricing model based on the assumptions noted in the table below. Expected volatilities are based on historical volatilities of Bancshares’ common stock.

	2017			2016
Risk-free interest rate		2.23	%		1.58	%
Expected term	7.5 years			7.5 years
Expected stock price volatility		25.36	%		25.25	%
Dividend yield		1.50	%		1.50	%

The following table summarizes the Company's stock option activity for the periods presented.

	Nine Months Ended
	September 30 , 2017				September 30 , 2016
	Number of Shares		Average Exercise Price		Number of Shares		Average Exercise Price
Options:
Outstanding, beginning of period		272,550	$	8.21		175,550	$	8.17
Granted		70,600		13.84		97,000		8.30
Exercised		19,316		8.15		—		—
Expired		—		—		—		—
Forfeited		3,334		11.79		—		—
Options outstanding, end of period		320,500	$	9.42		272,550	$	8.21
Options exercisable, end of period		208,633	$	8.20		175,550	$	8.17

The aggregate intrinsic value of stock options outstanding (calculated as the

amount by which the market value of underlying stock exceeds the exercise price of the option) was approximately

$0.8

million and

$0.4

million as of

September 30, 2017

and

2016,

respectively.

Restricted Stock

During the

first

nine

months of

2017,

7,533

shares of restricted stock were granted with vesting periods of either

one

three

years.

shares of restricted stock were granted during the

nine

months ended

September 30, 2016.

The Company recognizes the cost of services received in exchange for restricted stock awards based on the grant date closing price of the stock, with compensation expense recognized on a straight-line basis over the award’s vesting period.