NOTE 5 — Share-Based Payment Plans

The Company issues incentive and nonqualified 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.

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.

There were no stock options granted during the three months ended March 31, 2020 and the three months ended March 31, 2019.

The following table presents a summary of the activity related to options as of March 31, 2020:


				Weighted
		Weighted		Average
		Average		Remaining
		Exercise		Contractual
	Options	Price		Life (Years)
March 31, 2020
Outstanding at beginning of year	916,425	$	13.56
Granted	—		—
Exercised	(65,200)		12.50
Forfeited	(1,000)		24.90
Outstanding at period end	850,225	$	13.62	6.11
Vested or expected to vest	850,225	$	13.62	6.11
Exercisable at period end	655,622	$	13.10	5.93

The Company recognized compensation expense related to options of $132 thousand and $133 thousand for the three months ended March 31, 2020 and 2019, respectively. At March 31, 2020, unrecognized compensation cost related to nonvested options was approximately $600 thousand and is expected to be recognized over a weighted average period of 1.48 years. The intrinsic value for outstanding options and for options vested or expected to vest was $1.9 million and $1.6 million for exercisable options at March 31, 2020. Cash received from options exercised in the first quarter of 2020 totaled $290 thousand with an intrinsic value of $878 thousand. The excess tax benefit of options exercised was $77 thousand.

The following table presents a summary of the activity related to restricted stock as of March 31, 2020:


		Weighted Average
		Grant Date
	Shares	Fair Value
March 31, 2020
Outstanding at beginning of year	259,000	$	23.81
Granted	—		—
Vested	—		—
Outstanding at period end	259,000	$	23.81

The Company recognized compensation expense related to restricted stock of $256 thousand and $137 thousand for the three months ended March 31, 2020 and 2019, respectively. As of March 31, 2020, there was $5.1 million of total unrecognized compensation cost related to nonvested shares granted under the plan. The cost is expected to be recognized over a weighted-average period of 5.11 years.