NOTE 9 — Employee Benefits

401(k) Plan

A savings plan is maintained under section 401(k) of the Internal Revenue Code and covers substantially all current full-time employees. Newly hired employees can elect to participate in the savings plan after completing one month of service. In 2019, 2018 and 2017, the Company matched 100% of employee contributions up to 2% of their salary in 2019 and 1% in prior years resulting in total expenses of $126, $47 and $18, respectively.

Share Based Payment Plans

The Company issues incentive and non-statutory stock options and restricted stock awards to certain employees and directors pursuant to its equity incentive plans, which have been approved by the stockholders. Share-based awards are granted by the Compensation Committee of the Board of Directors.

The Company’s 2007 Stock Option Plan allowed for a maximum of 270,000 shares of common stock to be issued. As of December 31, 2019, 269,500 shares have been issued. The 2007 Stock Option Plan expired in May of 2017 and no new options can be granted from the plan.

The Company’s 2011 Stock Compensation Plan allows for a maximum of 754,607 shares of common stock to be issued. The Company has 62 shares available for issuance under the 2011 Stock Compensation Plan as of December 31, 2019.

The Company’s 2017 Equity Incentive Plan allows for a maximum of 300,000 shares of common stock to be issued. A total of 6,750 shares remain available for grant under the 2017 Equity Incentive Plan all of which are to be granted as stock options.

The Company’s 2019 Equity Incentive Plan allows for a maximum of 300,000 shares of common stock to be issued. A total of 226,000 shares remain available for grant under the 2019 Equity Incentive Plan of which 100,000 can be granted as stock options and 126,000 can be granted as restricted shares.

Under the plans, options are granted with an exercise price equal to the fair value of the Company’s stock at the date of the grant. Options granted vest over three or five years and have ten-year contractual terms. All options provide for accelerated vesting upon a change in control (as defined in the plans). Restricted shares are granted at the fair value on the date of grant and typically vest over 6 years with a third vesting after years four, five, and six. Restricted shares have the same voting rights as common stock and nonvested restricted shareholders do not have rights to the accrued dividends until vested.

The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below. Expected volatilities are based on peer volatility. The Company uses peer data to estimate option exercise and post-vesting termination behavior. The expected term of options granted is based on peer data and 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.

The fair value of options granted was determined using the following weighted-average assumptions as of grant date.



	2019			2018			2017
Risk-Free Interest Rate		1.85	%		2.65	%		N/A
Expected Term		84 months			84 months			N/A
Expected Stock Price Volatility		22.1	%		20.6	%		N/A
Dividend Yield		0.00	%		0.00	%		N/A

Weighted Average Fair Value	$	7.18			6.43			N/A

The following table presents a summary of the activity related to options as of December 31, 2019:


				Weighted
		Weighted		Average
		Average		Remaining
		Exercise		Contractual
	Options	Price		Life (Years)
December 31, 2019
Outstanding at beginning of year	919,175	$	13.39
Granted	11,250		25.50
Exercised	(14,000)		12.50
Forfeited	—		—
Outstanding at period end	916,425	$	13.56	5.92
Vested or expected to vest	916,425	$	13.56	5.92
Exercisable at period end	709,660	$	12.95	5.59

The Company recognized compensation expense related to options of $521, $1,007 and $554 for the years ended December 31, 2019, 2018 and 2017, respectively. At December 31, 2019, unrecognized compensation cost related to non-vested options was approximately $738 and is expected to be recognized over a weighted average period of 1.67 years. The intrinsic value for outstanding options net of expected forfeitures was $11,469. The intrinsic value for exercisable options at December 31, 2019 was $9,312. Cash received from options exercised in 2019 totaled $50 with an intrinsic value of $163. The excess tax benefit of options exercised was $23.

The following table presents a summary of the activity related to restricted stock as of December 31, 2019:


		Weighted Average
		Grant Date
	Shares	Fair Value
December 31, 2019
Outstanding at beginning of year	148,500	$	22.56
Granted	110,500		25.50
Vested	—		—
Outstanding at period end	259,000	$	23.81

The Company recognized compensation expense related to restricted stock of $574 and $496 for the years ended December 31, 2019 and 2018. As of December 31, 2019, there was $5,387 of total unrecognized compensation cost related to non-vested shares granted under the plan. The cost is expected to be recognized over a weighted-average period of 5.35 years.