Note 11 - Stock Option Plan

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

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

NOTE

1

1

— STOCK OPTION PLAN

The Company currently has

two

equity based incentive plans, the Oak Valley Bancorp

2008

Stock Plan and the Oak Valley Bancorp

2018

Stock Plan. The

2018

Stock Plan provides for awards in the form of incentive stocks, non-statutory stock options, stock appreciation rights and restrictive stocks. Under the

2018

Plan, the Company is authorized to issue

607,500

shares of its common stock to key employees and directors as incentive and non-qualified stock options, respectively, at a price equal to the fair value on the date of grant. The Plan provides that the options are exercisable in equal increments over a

five

-year period from the date of grant or over any other schedule approved by the Board of Directors. All incentive stock options expire

no

later than

ten

 years from the date of grant. Future grants are

not

permitted under the

2008

Stock Plan and will all be issued from the

2018

Stock Plan until it expires. As of

December 31, 2018,

595,250

shares were available to be issued under the

2018

Stock Plan pursuant to new grants.

A summary of the status of the Company’s stock option plan and changes during the years end

December 31, 2018

and

2017

are presented below.

	DECEMBER 31, 201 8					DECEMBER 31, 201 7
	Shares			Weighted- Average Exercise Price		Shares			Weighted- Average Exercise Price
Outstanding at beginning of year		3,500		$	5.94		15,000		$	9.58
Granted		0		$	0.00		0		$	0.00
Exercised		(1,500	)	$	4.58		(9,000	)	$	10.10
Forfeited		(1,000	)	$	8.25		(2,500	)	$	12.75
Outstanding at end of year		1,000		$	5.74		3,500		$	5.94

(dollars in thousands)	December 31,
	201 8		201 7
Weighted-average fair value of options granted during the year		N/A		N/A
Intrinsic value of options exercised	$	20	$	56
Options outstanding and exercisable at year end:		1,000		3,500
Weighted average exercise price	$	5.74	$	5.94
Intrinsic value	$	13	$	48
Weighted average remaining contractual life (in months)		1		9

For the year ended

December 

31,

2018

and

2017,

there was

no

recorded income tax benefits related to disqualifying dispositions of stock option exercises. All outstanding stock options became fully vested during

2014

and therefore there is

no

remaining unrecognized stock option compensation expense.

A summary of the status of the Company’s restricted stock and changes during the years ended

December 31, 2018

and

2017

are presented below.

	DECEMBER 31, 2018					DECEMBER 31, 2017
	Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value
Unvested at beginning of year		24,800		$	11.07		56,075		$	8.16
Granted		96,650		$	21.40		8,000		$	14.62
Vested		(11,900	)	$	11.93		(32,425	)	$	7.45
Cancelled		(1,950	)	$	20.21		(6,850	)	$	8.54
Unvested at end of year		107,600		$	20.09		24,800		$	11.07

The Company granted

96,650

shares of restricted stock in

2018

with a weighted average fair value of

$21.40

per share. For the year ended

December 31, 2018,

total compensation expense recorded in the consolidated statements of income related to restricted stock awards was

$431,000,

with an offsetting tax benefit of

$128,000,

as this expense is deductible for income tax purposes. The Company recorded an additional tax benefit of

$22,000

to income tax expense to recognize the full tax deduction of the vested restricted stock, which is equal to the fair value on the vesting date, as the tax benefit from the restricted stock expense is based on the grant date fair value. As of

December 

31,

2018,

there was

$1,813,000

of total unrecognized compensation cost related to restricted stock awards which is expected to be recognized over a weighted-average period of

4.14

years. During

2018,

shares of restricted stock awards totaling

11,900

with a fair value of

$252,000,

based on the vested date of each award, were vested and became unrestricted.

The Company granted

8,000

shares of restricted stock in

2017

with a weighted average fair value of

$14.62

per share. For the year ended

December 31, 2017,

total compensation expense recorded in the consolidated statements of income related to restricted stock awards was

$103,000,

with an offsetting tax benefit of

$42,000,

as this expense is deductible for income tax purposes. The Company recorded an additional tax benefit of

$88,000

to income tax expense to recognize the full tax deduction of the vested restricted stock, which is equal to the fair value on the vesting date, as the tax benefit from the restricted stock expense is based on the grant date fair value. As of

December 

31,

2017,

there was

$216,000

of total unrecognized compensation cost related to restricted stock awards which is expected to be recognized over a weighted-average period of

3.46

years. During

2017,

shares of restricted stock awards totaling

32,425

with a fair value of

$241,000,

based on the vested date of each award, were vested and became unrestricted.