Stock Based Compensation

9 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

STOCK BASED COMPENSATION

On March 15, 2018, the Company’s Board of Directors approved the 2018 Equity Incentive Plan ("2018 Plan"). The 2018 Plan became effective upon shareholder approval at the annual shareholders meeting held on April 17, 2018. Under the 2018 Plan, the Company can grant incentive and non-qualified stock options, stock awards, stock appreciation rights, and other incentive awards to directors and employees of, and certain service providers to, the Company and its subsidiaries. Once the 2018 Plan became effective, no further awards could be granted from the 2007 Stock Option Plan ("Stock Option Plan") or the 2014 Equity Incentive Plan ("2014 Plan"). However, any outstanding equity awards granted under the Stock Option Plan or the 2014 Plan will remain subject to the terms of such plans until the time such awards are no longer outstanding.

The Company has reserved 250,000 shares of common stock for issuance under the 2018 Plan. During the nine months ended September 30, 2020 and 2019, the Company issued 38,170 and 35,633 restricted stock awards, respectively, under the 2018 Plan. There were 165,597 shares available for issuance as of September 30, 2020.

Stock Options

As of September 30, 2020, all of the Company's outstanding options were granted under the Stock Option Plan. The term of these options is ten years, and they vest one-third each year, over a three years period. The Company will use authorized, but unissued shares to satisfy share option exercises. The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model.

Expected volatilities are based on historical volatilities of the Company's common stock. The Company assumes all awards will vest. The expected term of options granted represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. There were no stock options granted during the nine months ended September 30, 2020 or September 30, 2019.

The summary of our stock option activity for the nine months ended September 30, 2020 is as follows:


	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term
Options outstanding, beginning of period	355,218	$	16.63	5.0

Exercised	(10,000)	9.57

Options outstanding, end of period	345,218	16.83		4.4
Options exercisable	335,216	$	16.59	4.3

The aggregate intrinsic value was $516 thousand for both options outstanding and exercisable as of September 30, 2020. As of September 30, 2020, there was $17 thousand of total unrecognized compensation cost related to stock options granted under the Stock Option Plan. The cost is expected to be recognized over a weighted-average period of 0.38 years.

Share-based compensation expense charged against income was $11 thousand and $12 thousand for the three months ended September 30, 2020 and 2019, respectively, and $33 thousand and $43 thousand for the nine months ended September 30, 2020 and 2019, respectively.

Restricted Stock Awards

A summary of changes in the Company's nonvested shares for the nine months ended September 30, 2020 is as follows:


Nonvested Shares	Shares	Weighted Average Grant-Date Fair Value
Nonvested at January 1, 2020	80,370	$	24.28
Granted	38,170	24.90
Vested	(19,850)	23.10
Forfeited	(1,400)	24.46
Nonvested at September 30, 2020	97,290	$	24.76

As of September 30, 2020, there was $1.2 million of total unrecognized compensation cost related to nonvested shares granted under the 2014 Plan and 2018 Plan. The cost is expected to be recognized over a weighted average period of 1.88 years. The total fair value of shares vested during the nine months ended September 30, 2020 was $459 thousand.

Total expense for restricted stock awards totaled $223 thousand and $177 thousand for the three months ended September 30, 2020 and 2019, respectively, and $620 thousand and $474 thousand for the nine months ended September 30, 2020 and 2019, respectively. For the nine months ended September 30, 2020 and 2019, there was $64 thousand and $43 thousand, respectively, of restricted stock redeemed to cover the payroll taxes due at the time of vesting.