Stock Compensation Plans

9 Months Ended

Sep. 30, 2015

Note 6. Stock Compensation Plans

At the Annual Shareholders Meeting on May 21, 2014, shareholders approved the Virginia National Bankshares Corporation 2014 Stock Incentive Plan (“2014 Plan”). The 2014 Plan makes available up to 250,000 shares of the Company's common stock to be issued to plan participants. Similar to the Virginia National Bank 1998 Stock Incentive Plan (“1998 Plan”), 2003 Stock Incentive Plan (“2003 Plan”), and 2005 Stock Incentive Plan (“2005 Plan”), the 2014 Plan provides for granting of both incentive and nonqualified stock options, as well as restricted stock and other stock based awards. The 2005 Plan expired on December 20, 2014. No new grants will be issued under the 1998 Plan, the 2003 Plan, or the 2005 Plan as all three plans have expired.

For all of the Company's stock incentive plans (the “Plans”), the option price of incentive options will not be less than the fair value of the stock at the time an option is granted. Nonqualified options may be granted at a price established by the Board of Directors, including prices less than the fair market value on the date of grant. Outstanding options generally expire in ten years from the grant date. Stock options generally vest by the fourth or fifth anniversary of the date of the grant.

A summary of the shares issued and available under each of the Plans is shown below as of September 30, 2015:

	1998 Plan			2003 Plan			2005 Plan			2014 Plan
Aggregate shares issuable		430,100			128,369			230,000			250,000
Options issued, net of forfeited
and expired options		(379,939	)		(108,054	)		(142,947	)		-
Cancelled due to Plan expiration		(50,161	)		(20,315	)		(87,053	)		-
Remaining available for grant		-			-			-			250,000

Grants issued and outstanding:
Total vested and unvested shares		-			30,214			140,304			-
Fully vested shares		-			30,214			134,054			-

Exercise price range		N/A		$	15.65 to		$	11.74 to			N/A
				$	18.26		$	36.74

The Company accounts for all of its stock incentive plans under recognition and measurement accounting principles which require that the compensation cost relating to stock-based payment transactions be recognized in the financial statements. Stock-based compensation arrangements include stock options and restricted stock. All stock-based payments to employees are required to be valued at a fair value on the date of grant and expensed based on that fair value over the applicable vesting period. For the nine months ended September 30, 2015 and 2014, the Company recognized $22 thousand and $38 thousand, respectively, in compensation expense for stock options, and for the nine months ended September 30, 2014, an additional $3 thousand was recognized in compensation expense for restricted stock grants. As of September 30, 2015, there was $43 thousand in unamortized compensation expense remaining to be recognized in future reporting periods through 2017.

Stock Options

Changes in the stock options outstanding related to all of the Plans are summarized as follows (dollars in thousands except per share data):

		September 30, 2015
				Weighted Average		Aggregate
	Number of Options			Exercise Price		Intrinsic Value
Outstanding at January 1, 2015		180,796		$	25.86	$	271
Forfeited		(9,028	)		24.46		-
Exercised		(1,250	)		18.10		-
Outstanding at September 30, 2015		170,518		$	25.99	$	259

Options exercisable at September 30, 2015		164,268		$	26.33	$	222

The fair value of any grant is estimated at the grant date using the Black-Scholes pricing model. There were no stock option grants during the first three quarters of 2015, and there were stock option grants of 5,000 shares during the first quarter of 2014.

Summary information pertaining to options outstanding at September 30, 2015 is as follows:

		Options Outstanding					Options Exercisable
			Weighted-	Weighted-				Weighted-
	Number of		Average	Average		Number of		Average
	Options		Remaining	Exercise		Options		Exercise
Exercise Price	Outstanding		Contractual Life	Price		Exercisable		Price
$11.74 to 20.00		45,764	4.7 Years	$	17.17		39,514	$	17.22
$20.01 to 30.00		58,514	2.4 Years		24.83		58,514		24.83
$30.01 to 36.74		66,240	0.7 Years		33.10		66,240		33.10
Total		170,518	2.4 Years	$	25.99		164,268	$	26.33

Restricted Stock

The restricted stock that had been outstanding as of September 30, 2014 was fully vested in November 2014. No restricted stock grants were awarded during 2014 or the first nine months of 2015.