STOCK-BASED COMPENSATION

May 2013,

the Company established the

2013

Stock Option Plan for which

396,835

shares of common stock are reserved and

101,500

shares are available for future grants as of

March 31, 2020

. 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

nine

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.

During the

three

months ended

March 31, 2019

the Company granted options to purchase

5,000

shares of common stock.

options were granted during the

three

months ended

March 31, 2019.

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

	2020
Expected life of stock options (in years)		5.1
Risk free interest rate		1.68	%
Daily Volatility		26.0	%
Dividend yields		1.29	%
Weighted-average fair value of options granted during the three months ended March 31, 2020	$	5.92

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, 2020		302,385		$	17.73
Options granted		5,000		$	26.42
Options exercised		(12,050	)		6.68
Options outstanding at March 31, 2020		295,335		$	18.33		6.0	$	899,000
Options exercisable at March 31, 2020		122,785		$	12.89		4.2	$	899,000
Expected to vest after March 31, 2020		152,897		$	22.20		7.2	$	-

As of

March 31, 2020

, there was

$768,000

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

3.2

years.

The total fair value of options vested during the

three

months ended

March 31, 2020

and

2019

was

$189,000

and

$197,000,

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

$235,000

and

$251,000

for the

three

months ended

March 31, 2020

and

2019

, respectively.

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

$78,000

and

$50,000

for the

three

months ended

March 31, 2020

and

2019

, respectively. The associated income tax benefit recognized was

$6,000

and

$3,000

for the

three

months ended

March 31, 2020

and

March 31, 2019

, respectively.

Cash received from option exercises under the plans for the

three

months ended

March 31, 2020

and

2019

were

$35,000

and

76,000,

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

$10,000

and

for the

three

months ended

March 31, 2020

and

2019

, respectively.