STOCK-BASED COMPENSATION

2001,

the Company established a Stock Option Plan for which

shares of common stock remain reserved for issuance to employees and directors and

shares are available for future grants as of

March 31, 2019.

As of

March 31, 2019,

all remaining shares in this plan have vested and

compensation cost remains unrecognized.

A summary of the activity within the

2001

Stock Option Plan follows:

	Shares			Weighted Average Exercise Price

Options outstanding at January 1, 2019		6,193		$	2.95
Options exercised		(6,193	)		2.95
Options outstanding at March 31, 2019		-		$	-

May 2013,

the Company established the

2013

Stock Option Plan for which

425,400

shares of common stock are reserved and

236,100

shares are available for future grants as of

March 31, 2019.

The

2013

Plan requires that the option price

may

not

be less than the fair market value of the stock at the date the option is granted, and that the stock must be paid in full at the time the option is exercised. Payment in full for the option price must be made in cash, with Company common stock previously acquired by the optionee and held by the optionee for a period of at least

six

months, in options of the Optionee that are fully vested and exercisable or in any combination of the foregoing. The options expire on dates determined by the Board of Directors, but

not

later than

ten

years from the date of grant.

options were granted during the

three

months ended

March 31, 2019.

During the

three

months ended

March 31, 2018

the Company granted options to purchase

76,000

shares of common stock. The fair value of each option was estimated on the date of grant using the following assumptions.

	2018
Expected life of stock options (in years)		5.1
Risk free interest rate		2.38	%
Volatility		30.4	%
Dividend yields		1.39	%
Weighted-average fair value of options granted during the three months ended March 31, 2018	$	6.54

The Company determines the fair value of options on the date of grant using a Black-Scholes-Merton option pricing model that uses assumptions based on expected option life, expected stock volatility and the risk-free interest rate. The expected volatility assumptions used by the Company are based on the historical volatility of the Company’s common stock over the most recent period commensurate with the estimated expected life of the Company’s stock options. The Company bases its expected life assumption on its historical experience and on the terms and conditions of the stock options it grants to employees. The risk-free rate is based on the U.S. Treasury yield curve for the periods within the contractual life of the options in effect at the time of the grant.

A summary of the activity within the

2013

Plan follows:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term in Years		Intrinsic Value
Options outstanding at January 1, 2019		196,500		$	13.84
Options exercised		(7,200	)		7.94
Options outstanding at March 31, 2019		189,300		$	14.07		5.2	$	1,766,000
Options exercisable at March 31, 2019		113,175		$	10.27		4.5	$	1,446,000
Expected to vest after March 31, 2019		67,569		$	19.71		6.3	$	320,000

As of

March 31, 2019,

there was

$408,000

of total unrecognized compensation cost related to non-vested, share-based compensation. That cost is expected to be recognized over a weighted average period of

2.4

years.

Compensation cost related to stock options recognized in operating results under the

2013

plan was

$50,000

and

$47,000

for the

three

months ended

March 31, 2019

and

2018,

respectively. The associated income tax benefit recognized was

$3,000

and

$5,000

for the

three

months ended

March 31, 2019

and

March 31, 2018,

respectively.

The total fair value of options vested under the

2013

plan during the

three

months ended

March 31, 2019

and

2018

was

$197,000

and

$84,000,

respectively. The total intrinsic value of options at time of exercise under the plans was

$251,000

and

$351,000

for the

three

months ended

March 31, 2019

and

2018,

respectively.

Cash received from option exercises under the plans for the

three

months ended

March 31, 2019

and

2018

were

$76,000

and

$82,000,

respectively. The tax benefit realized for the tax deductions from option exercise totaled

and

$65,000

for the

three

months ended

March 31, 2019

and

2018,

respectively.