Stock-Based Compensation

The Company currently has one active stock incentive plan: The Enterprise Bancorp, Inc. 2016 Stock Incentive Plan, as amended (the "2016 plan"). As of March 31, 2020, 189,873 shares remained available for future grants under the 2016 plan.

Additionally, the Enterprise Bancorp, Inc 2009 Stock Incentive Plan, as amended, (the "2009 plan") expired in March 2019 with 87,849 unissued shares. As such, the 2009 plan is closed for future grants, although awards previously granted under the 2009 plan remain outstanding and may be exercised through 2028.

The Company's stock-based compensation expense related to these plans includes stock options and stock awards to officers and other employees included in salary and benefits expense, and stock awards and stock compensation in lieu of cash fees to non-employee directors, both included in other operating expenses. Total stock-based compensation expense was $426 thousand for both the three months ended March 31, 2020 and March 31, 2019.

A tax expense associated with employee exercises and vesting of stock compensation of approximately $32 thousand was recorded as an addition to the Company's income tax expense for the three months ended March 31, 2020, compared with a tax benefit of $111 thousand for the three months ended March 31, 2019. These amounts, treated as discrete tax items in the period in which they occur, will vary from year to year as a function of the volume of share-based payments vested or exercised and the then-current market price of the Company's stock in comparison to the compensation cost recognized in the Company's unaudited consolidated interim financial statements.

Stock Option Awards

The table below provides a summary of the options granted, including the weighted average fair value, the fair value as a percentage of the market value of the stock at the date of grant and the average assumptions used in the model for the periods indicated:



	Three Months Ended March 31,
	2020			2019
Options granted	24,208			23,218
Term in years	10			10
Weighted average assumptions used in the fair value model:
Expected volatility	37		%	33		%
Expected dividend yield	3.43		%	2.75		%
Expected life in years	6.5			6.5
Risk-free interest rate	1.02		%	2.58		%
Weighted average market price on date of grants	$	28.22		$	29.84
Per share weighted average fair value	$	8.41		$	8.70
Fair value as a percentage of market value at grant date	30		%	29		%

Options granted during the first three months of 2020 and 2019 generally vest 50% in year two and 50% in year four, on or about the anniversary date of the awards.

The Company utilizes the Black-Scholes option valuation model in order to determine the per share grant date fair value of stock option grants.

The Company recognized stock-based compensation expense related to stock option awards of $45 thousand for the three months ended March 31, 2020, compared to $48 thousand for the three months ended March 31, 2019.

Restricted Stock Awards

Restricted stock awards are granted at the market price of the Company's common stock on the date of the grant. Employee restricted stock awards generally vest over four years in equal portions beginning on or about the first anniversary date of the restricted stock award or are performance-based restricted stock awards that vest upon the Company achieving certain predefined performance objectives. Non-employee director restricted stock awards generally vest over two years in equal portions beginning on or about the first anniversary date of the restricted stock award.

The table below provides a summary of restricted stock awards granted during the periods indicated:



	Three Months Ended March 31,
Restricted Stock Awards (number of underlying shares)	2020		2019
Two-year vesting	8,295		8,368
Four-year vesting	26,015		22,403
Performance-based vesting	25,001		24,427
Total restricted stock awards granted	59,311		55,198
Weighted average grant date fair value	$	28.22	$	29.84

Stock-based compensation expense recognized in association with stock awards, mainly restricted stock awards, amounted to $309 thousand for the three months ended March 31, 2020, compared to $301 thousand for the three months ended March 31, 2019.

Stock in Lieu of Directors' Fees

In addition to restricted stock awards discussed above, the non-employee members of the Company's Board may opt to receive newly issued shares of the Company's common stock in lieu of cash compensation for attendance at Board and Board committee meetings. Stock-based compensation expense related to these directors' fees amounted to $72 thousand for the three months ended March 31, 2020, compared to $77 thousand for the three months ended March 31, 2019, and is included in other operating expenses. In January 2020, non-employee directors were issued 8,346 shares of the Company's common stock in lieu of 2019 annual cash fees of $253 thousand at a price of $30.35 per share, based on the Company's average quarterly close price in 2019.

For further information regarding the Company's stock awards, see Note 9, "Stockholders' Equity," to the Company's unaudited consolidated interim financial statements of this Form 10-Q, contained above, under the caption "Shares Authorized and Share Issuance." There have been no material changes to the terms of the Company's stock incentive plans or the terms for vesting, forfeiture and settlement for options and restricted stock awards granted and outstanding under such plans as reported in the 2019 Annual Report on Form 10-K. Refer to Note 13, "Stock-Based Compensation Plans," to the Company's audited consolidated financial statements in the Company's 2019 Annual Report on Form 10-K for further information on the Company's stock incentive plans, stock options and restricted awards including descriptions of the assumptions used in the valuation model for stock options.