Share-Based Compensation

6 Months Ended

Jun. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

The Company’s share-based incentive plans (“Stock Plans”) authorize the issuance of an aggregate of 485,873 shares of the Company’s common stock (as adjusted for stock dividends) pursuant to awards that may be granted in the form of stock options to purchase common stock (“Options”) and awards of shares of common stock (“Stock Awards”). The purpose of the Stock Plans is to attract and retain personnel for positions of substantial responsibility and to provide additional incentive to certain officers, directors, employees and other persons to promote the success of the Company. Under the Stock Plans, options may have a term of not more than ten years after the date of grant, subject to earlier termination in certain circumstances. Options are granted with an exercise price at the closing price of the Company’s common stock on the date of grant or otherwise as provided for in the Stock Plans. The grant date fair value is calculated using the Black – Scholes option valuation model.

As of June 30, 2017, there were 148,462 shares of common stock available for future grants under the Stock Plans.

The following table summarizes stock option activity during the six months ended June 30, 2017:



(Dollars in thousands, except share amounts)	Number of		Weighted Average		Weighted Average Remaining Contractual	Aggregate Intrinsic
Stock Options	Shares		Exercise Price		Term (years)	Value
Outstanding at January 1, 2017	165,801		$	7.35
Granted	9,900		18.65
Exercised	(12,361	)	7.85
Forfeited	(715	)	15.71
Expired	—		—
Outstanding at June 30, 2017	162,625		$	7.97	4.7	$	1,574
Exercisable at June 30, 2017	132,566		$	6.88	3.9	$	1,428

The fair value of each option and the significant weighted average assumptions used to calculate the fair value of the options granted for the six months ended June 30, 2017 were as follows:




Fair value of options granted	$	6.05
Risk-free rate of return	2.45		%
Expected option life in years	7
Expected volatility	31.25		%
Expected dividends ⁽¹⁾	1.19		%

⁽¹⁾ The Company declared its first cash dividend on September 15, 2016.

The following table summarizes the activity in non-vested restricted shares for the six months ended June 30, 2017:



	Number of		Average Grant-Date
Non-vested shares	Shares		Fair Value
Non-vested at January 1, 2017	143,259		$	9.02
Granted	39,100		18.26
Vested	(26,210	)	11.08
Forfeited	(1,287	)	14.94
Non-vested at June 30, 2017	154,862		$	10.96

The fair value of restricted shares is based upon the closing price of the common stock on the date of grant. The shares generally vest over a 4 year service period for employees and a 2 year service period for non-employee directors with compensation expense recognized on a straight-line basis.

Share-based compensation expense related to options was $28,000 for the six months ended June 30, 2017 and $22,000 for the six months ended June 30, 2016. Share-based compensation expense related to stock grants was $456,000 and $340,000 for the six months ended June 30, 2017 and 2016, respectively.

As of June 30, 2017, there was approximately $103,000 of unrecognized compensation cost related to non-vested stock options and $1.6 million of unrecognized compensation cost related to non-vested stock grants.

Except for stock option grants and restricted stock grants to employees that are older than or will be of retirement age of 65 years old in the current year, as described in the stock option agreements and restricted stock agreements, the unrecognized compensation expense is expected to be recognized over the next four years. Unvested grants of stock options and restricted stock to employees who are older than or are of such retirement age, as described in the stock option agreements and restricted stock agreements, become 100% vested upon an employee's retirement, unless the employee’s employment contract provides for a different vesting period. Accordingly, the full compensation cost related to these stock options and restricted stock grants are recognized at the time of the grant. Compensation costs related to non-vested stock grants for non-employee directors are recognized over two years from the date of grant.