On May 21, 2019, the shareholders of the Company approved the Fauquier Bankshares, Inc. Amended and Restated Stock Incentive Plan (the “Plan”). The Plan superseded the Company’s stock incentive plan that was approved by shareholders in 2009. Under the Plan, awards of options, restricted stock, and other stock-based awards may be granted to employees, directors or consultants of the Company or any affiliate. The effective date of the Plan was May 21, 2019. The Plan has a termination date of May 21, 2029. The Company’s Board of Directors may terminate, suspend or modify the Plan within certain restrictions. The Plan authorizes for issuance 350,000 shares of the Company’s common stock.

Restricted shares are accounted for using the fair market value of the Company’s common stock on the date on which these shares were awarded. The restricted shares issued to certain executive officers are subject to a vesting period, whereby the restrictions on the shares lapse on the third anniversary of the date the shares were awarded. Compensation expense for these shares is recognized over the three-year period. The restricted shares issued to nonemployee directors are not subject to a vesting period and compensation expense is recognized on the date the shares are granted. Compensation expense for restricted shares was $35,000 and $40,000, net of forfeitures, for the three months ended September 30, 2020 and 2019, respectively, and $194,000 and $208,000 for the nine months ended September 30, 2020 and 2019, respectively. The total unrecognized compensation expense related to restricted shares was $203,000 and $200,000 for the nine months ended September 30, 2020 and 2019, respectively. This expense is expected to be recognized through 2023. Restricted stock expense is expected to be accelerated upon the completion of the Merger.

A summary of the status of the Company’s unvested restricted shares granted under the Plan is presented below:

	September 30, 2020					September 30, 2019
	Shares			Weighted Average Grant Date Fair Value Per Share		Shares			Weighted Average Grant Date Fair Value Per Share
Unvested shares, beginning		20,352		$	20.20		22,569		$	17.98
Granted		12,182			20.95		12,058			21.69
Vested		(10,684	)		19.14		(10,553	)		17.84
Forfeited or surrendered		(2,007	)		19.21		(440	)		14.98
Unvested shares, ending		19,843		$	21.33		23,634		$	20.10

The Company grants performance-based restricted stock units to certain executive officers. Performance-based restricted stock units are accounted for using the fair market value of the Company’s common stock on the date awarded, and adjusted for subsequent changes in the market value. Performance-based restricted stock units are subject to a vesting period, whereby the restrictions on the rights lapse on the third anniversary of the date the units were awarded. Until vesting, the shares underlying the units are not issued and are not included in shares outstanding. Vesting is contingent upon the Company’s reaching predetermined performance goals as compared with a predetermined peer group of banks. Compensation expense for performance-based restricted stock units was $17,000, net of forfeitures, for each of the three months ended September 30, 2020 and 2019, and $(82,000) and $71,000 for the nine months ended September 30, 2020 and 2019, respectively. The total unrecognized compensation expense related to performance-based restricted stock units was $98,000 and $104,000 for the nine months ended September 30, 2020 and 2019, respectively. This expense is expected to be recognized through 2023. Expenses associated with performance-based restricted stock units are expected to be accelerated upon the completion of the Merger.

A summary of the status of the Company’s unvested performance-based restricted stock units is presented below:

	September 30, 2020					September 30, 2019
	Restricted Stock Units			Weighted Average Grant Date Fair Value Per Share		Restricted Stock Units		Weighted Average Grant Date Fair Value Per Share
Unvested shares, beginning		30,012		$	18.90		22,103	$	17.90
Granted		7,889			20.95		7,909		21.69
Vested		(826	)		19.74		-		-
Forfeited		(11,701	)		16.92		-		-
Unvested shares, ending		25,374		$	20.43		30,012	$	18.98