STOCK-BASED COMPENSATION

6 Months Ended

Jun. 30, 2020

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

NOTE 18: STOCK-BASED COMPENSATION

The Company acquired a stock option plan which originated under VB Texas, Inc. as a part of a merger of the two companies. The options granted to employees under this plan must be exercised within 10 years from the date of grant and vesting schedules are determined on an individual basis. At the merger date, all outstanding options became fully vested and were converted to options to acquire the Company’s common stock at an exchange ratio equal to the acquisition exchange rate for common shares. No options were granted under this plan after October 24, 2016.

In May 2014, the Company adopted the 2014 Stock Option Plan, or the 2014 Plan. The 2014 Plan was approved by the Company’s shareholders and limits the number of shares that may be optioned to 1,127,200. The 2014 Plan provides that no options may be granted after May 20, 2024. Options granted under the 2014 Plan expire 10 years from the date of grant and become exercisable in installments over a period of one to five years, beginning on the first anniversary of the date of grant. At June 30, 2020, 963,200 shares were available for future grant under the 2014 Plan.

In September 2017, the Company adopted the 2017 Omnibus Incentive Plan, or the 2017 Plan. The 2017 Plan authorizes the Company to grant options and performance-based and non-performance based restricted stock awards as well as various other types of stock-based and other awards that are not stock-based to eligible employees, consultants and non-employee directors up to an aggregate of 600,000 shares of common stock. At June 30, 2020, 285,422 shares were available for future grant under the 2017 Plan.

Stock option activity for the periods shown below was as follows:

	Six Months Ended June 30,
	2020			2019
	Number of	Weighted		Number of	Weighted
	Shares	Average		Shares	Average
	Underlying	Exercise		Underlying	Exercise
	Options	Price		Options	Price
Outstanding at beginning of period	213,078	$	16.92	232,322	$	16.66
Granted	—		—	—		—
Exercised	(2,524)		12.90	(14,844)		12.62
Forfeited/expired	—		—	(2,000)		18.25
Outstanding at end of period	210,554		16.97	215,478		16.93

A summary of stock options as of the date shown below was as follows:

	June 30, 2020
Stock Options		Exercisable		Unvested		Outstanding
Number of shares underlying options		172,555		37,999		210,554
Weighted-average exercise price per share	$	16.09	$	21.00	$	16.97
Aggregate intrinsic value (in thousands)	$	848	$	—	$	848
Weighted-average remaining contractual term (years)		4.6		7.0		5.0

The fair value of the Company’s restricted stock awards is estimated based on the market value of the Company’s common stock at the date of grant. Restricted stock shares are considered fully issued at the time of the grant and the grantee becomes the record owner of the restricted stock and has voting, dividend and other shareholder rights. The shares of restricted stock are non-transferable and subject to forfeiture until the restricted stock vests and any dividends with respect to the restricted stock are subject to the same restrictions, including the risk of forfeiture.

Non-performance based restricted stock grants vest over the service period in equal increments over a period of two to five years, beginning on the first anniversary of the date of grant.

The number of shares earned under the Company’s performance-based restricted stock award agreements is based on the achievement of certain branch production goals. Compensation expense for performance-based restricted stock is recognized for the probable award level over the period estimated to achieve the performance conditions and other goals, on a straight-line basis. If the probable award level and/or the period estimated to be achieved change, compensation expense will be adjusted via a cumulative catch-up adjustment to reflect these changes. The performance conditions and goals must be achieved within five years or the awards expire. The number of performance-based shares granted presented in the table below is based upon the attainment of the maximum number of shares possible to be earned.

Restricted stock activity for the periods shown below was as follows:

	Non-performance Based			Performance-based
		Weighted			Weighted
		Average			Average
	Number of	Grant Date		Number of	Grant Date
	Shares	Fair Value		Shares	Fair Value
Outstanding at December 31, 2018	181,773	$	27.05	24,000	$	34.46
Granted	35,687		32.26	—		—
Vested	(3,100)		29.69	—		—
Forfeited	(3,207)		29.98	—		—
Outstanding at June 30, 2019	211,153	$	27.85	24,000	$	34.46
Outstanding at December 31, 2019	161,443	$	28.20	18,000	$	34.46
Granted	40,594		28.55	—		—
Vested	(14,550)		31.71	—		—
Forfeited	(8,656)		27.22	(750)		31.79
Outstanding at June 30, 2020	178,831	$	28.04	17,250	$	34.57

A summary of restricted stock as of the date shown below was as follows:

	June 30, 2020
Restricted Stock		Non-performance Based		Performance-based
Number of shares underlying restricted stock		178,831		17,250
Weighted-average grant date fair value per share	$	28.04	$	34.57
Aggregate fair value (in thousands)	$	3,755	$	362
Weighted-average remaining vesting period (years)		2.4		2.3

The Company’s stock compensation plans allow employees to elect to have shares withheld to satisfy their tax liabilities related to options exercised or restricted stock vested or to pay the exercise price of the options. During the periods shown below, the shares of stock subject to options exercised, restricted stock vested, shares withheld, and shares issued were as follows:

	Exercised/Vested	Shares Withheld	Shares Issued
Six Months Ended June 30, 2020
Stock options	2,524	—	2,524
Non-performance based restricted stock	14,550	(1,697)	12,853
Performance-based restricted stock	—	—	—
Six Months Ended June 30, 2019
Stock options	14,844	(2,038)	12,806
Non-performance based restricted stock	3,100	(658)	2,442
Performance-based restricted stock	—	—	—

For the six months ended June 30, 2020 and 2019, stock compensation expense was $1.1 million and $1.1 million, respectively, and for the three months ended June 30, 2020 and 2019, stock compensation expense was $552,000 and $567,000, respectively. As of June 30, 2020, there was approximately $4.6 million of total unrecognized compensation expense related to the unvested stock options, non-performance based restricted stock and performance-based restricted stock, which is expected to be recognized in the Company’s consolidated statements of income over a weighted-average period of 2.4 years.