2. STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2018

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

Equity Plans

On March 17, 2010, the Board of Directors adopted the 2010 Equity Incentive Plan (the “2010 Plan”). The 2010 Plan was approved by the Company’s shareholders on May 20, 2010. In 2000, the Board of Directors adopted and the Company’s shareholders approved a stock option plan (the “2000 Plan”), under which 18,041 options remain outstanding at September 30, 2018. At September 30, 2018, under the 2010 Plan, there were 31,008 stock options and 41,457 restricted shares outstanding and the total number of authorized shares that remain available for issuance was 1,290,590. The 2010 Plan provides for the following types of stock-based awards: incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted performance stock, unrestricted Company stock, and performance units. Awards under the 2000 Plan were either incentive stock options or nonqualified stock options. Under the 2010 Plan, the awards may be granted to employees and directors under incentive and nonqualified option agreements, restricted stock agreements, and other awards agreements. The unvested restricted stock under the 2010 Plan have dividend and voting rights. The 2010 Plan and the 2000 Plan (collectively the “Plans”) require that the option price may not be less than the fair market value of the stock at the date the option is awarded. The option awards under the Plans expire on dates determined by the Board of Directors, but not later than ten years from the date of award. The vesting period is generally five years; however, the vesting period can be modified at the discretion of the Company’s Board of Directors. Outstanding option awards under the Plans are exercisable until their expiration, however, no new options may be awarded under the 2000 Plan. New shares are issued upon exercise of an option.

The award date fair value of awards is determined by the market price of the Company’s common stock on the date of award and is recognized ratably as compensation expense or director expense over the vesting periods. The shares of common stock awarded pursuant to such agreements vest in increments over one to five years from the date of award. The shares awarded to employees and directors under the restricted stock agreements vest on the applicable vesting dates only to the extent the recipient of the shares is then an employee or a director of the Company or one of its subsidiaries, and each recipient will forfeit all of the shares that have not vested on the date his or her employment or service is terminated.

Equity Compensation

For the three-month periods ended September 30, 2018 and 2017, the compensation cost recognized for equity compensation was $83,000 and $109,000, respectively and the recognized tax benefit for equity compensation expense was $21,000 and $40,000, respectively, for the same three-month periods ended. For the nine-month periods ended September 30, 2018 and 2017, the compensation cost recognized for equity compensation was $233,000 and $310,000, respectively and the recognized tax benefit for equity compensation expense was $57,000 and $113,000, respectively, for the same nine-month periods.

At September 30, 2018, the total unrecognized pre-tax compensation cost related to nonvested stock option awards not yet recorded was $29,000. This amount will be recognized over the next 1.8 years and the weighted average period of recognizing these costs is expected to be 1.4 years. At September 30, 2018, the total compensation cost related to restricted stock awards not yet recorded was $444,000. This amount will be recognized over the next 4.7 years and the weighted average period of recognizing these costs is expected to be 1.4 years.

Equity Plans Activity

Stock Options

There were no stock options awarded during the three-month and nine-month periods ended September 30, 2018 or September 30, 2017. A summary of option activity under the Plans as of September 30, 2018 and changes during the period then ended is presented below:

Options	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value ($000)
Outstanding at January 1, 2018		97,543		$	11.26		3.1 years	$	419
Awarded		—			—		—		—
Exercised		(13,359	)		9.23		—		—
Expired, forfeited or cancelled		(35,135	)		15.67		—		—
Outstanding at September 30, 2018		49,049		$	8.65		3.6 years	$	327
Vested at September 30, 2018		41,913		$	8.54		3.2 years	$	284
Non-vested at September 30, 2018		7,136		$	9.29		6.2 years	$	43

Restricted Stock

There were no shares of restricted stock awarded during the three-month periods ended September 30, 2018 and 2017. There were 22,514 and 24,982 shares of restricted stock awarded during the nine-month periods ended September 30, 2018 and 2017, respectively.

There were no restricted share awards that were fully vested during the three-month periods ended September 30, 2018 and 2017. There were 25,455 restricted share awards that were fully vested during the nine-month period ended September 30, 2018 and 14,382 restricted share awards that were fully vested during the nine-month period ended September 30, 2017. There were zero and 4,655 restricted share awards forfeited during the three-month and nine-month periods ended September 30, 2018, respectively. There were zero and 2,950 restricted share awards forfeited during the three-month and nine-month periods ended September 30, 2017, respectively. The intrinsic value of nonvested restricted shares at September 30, 2018 was $635,000.

Restricted Stock	Shares			Weighted Average Award Date Fair Value
Nonvested at January 1, 2018		49,053		$	12.27
Awarded		22,514			15.44
Less: Vested		(25,455	)		10.84
Less: Expired, forfeited or cancelled		(4,655	)		13.69
Nonvested at September 30, 2018		41,457		$	10.61

Other Equity Awards

There were no stock appreciation rights, restricted performance stock, unrestricted Company stock, or performance units awarded during the three-month or nine-month month periods ended September 30, 2018 or 2017 or outstanding at September 30, 2018 or December 31, 2017.

The intrinsic value used for stock options and restricted stock awards was derived from the market price of the Company’s common stock of $15.32 as of September 30, 2018.