NOTE

– STOCK-BASED COMPENSATION

Stock-based expense for the years ended

December 31, 2018

and

2017,

were

$487,000

and

$25,000

of which

$354,000

and

$16,000

was charged to stock-based compensation expense and

$133,000

and

$9,000

was charged to stock-based other noninterest expense, respectively.

November 17, 2017

the stockholders approved the adoption of the

2017

Equity Incentive Plan (“Incentive Plan”). The Incentive Plan provides for the grant of a maximum of

263,127

shares of the Company’s common stock of which up to

187,948

shares of common stock

may

be granted for stock options and

75,179

shares of common stock

may

be issued as restricted stock to Directors and employees of the Company.

February 27, 2018

the Company awarded options to purchase

5,000

shares of the Company’s common stock and issued

439

shares of restricted stock. All stock option awards were granted with an exercise price equal to the grant date closing price of the Company’s common stock of

$15.48

per share. Stock options and restricted stock awards under the Incentive Plan vest at

20%

per year beginning on the

first

university of date of grant and have a maximum term of

seven

years.

The grant-date fair value of stock option awards granted on

February 27, 2018

was

$4.04

using the Black Scholes Merton options pricing model with the following inputs and assumptions:

Grant date stock price	$	15.48
Dividend yield		0.00	%
Expected volatility		19.55	%
Risk-free interest rate		2.75	%
Expected life in years		6

The Company also has vested and outstanding stock options issued under the

2001

Stock Option Plan (“Prior Plan”).

options were granted under the Prior Plan in

2018

2017

and

further options can be granted under this plan. There was

stock-based compensation expense under this plan in

2018

2017.

The expected volatility represents the average volatility of a peer group of financial institutions that had

step conversions prior to the company’s

2016

conversion. Historical data is used to estimate the term of options expected to be outstanding and takes into account that options are

not

transferable. The risk-free interest rate is based on the U.S. Treasury yield curve for the expected term in effect at the date of grant.

A summary of stock option activity during the years ended

December 31, 2018

and

2017

is presented below:

	For the Year Ended December 31, 2018
						Average
				Weighted-		Remaining
				Average		Contractual
	Shares			Exercise Price		Term (years)

Outstanding, December 31, 2017		207,108		$	14.18		6.2
Granted		5,000			15.48		-
Exercised		(15,464	)		9.65		-
Forfeited or expired		(32,234	)		13.98		-

Outstanding, December 31, 2018		164,410		$	14.68		5.8

Exercisable, December 31, 2018		37,890		$	13.89		4.9

	For the Year Ended December 31, 2017
						Average
				Weighted-		Remaining
				Average		Contractual
	Shares			Exercise Price		Term (years)

Outstanding, December 31, 2016		34,190		$	9.65		2.3
Granted		178,650			14.9 0		6.9
Exercised		(5,732	)		9. 65		-
Forfeited or expired		-			-		-

Outstanding, December 31, 2017		207,108		$	14.18		6.2

Exercisable, December 31, 2017		28,458		$	9.65		1.3

Information related to stock options during each year is as follows:

	Year Ended December 31,
	2018		2017

Intrinsic value of options exercised	$	89,080	$	25,909
Cash received from option exercises	$	149,228	$	55,314
Tax benefit from option exercises	$	24,866	$	21,240
Total weighted average fair value of options granted	$	20,200	$	653,859

A summary of restricted stock activity during the years ended

December 31, 2018

and

2017

is presented below:

				Weighted		Average
				Avererage		Remaining
				Grant Date		Contractual
	Shares			Price		Term (years)

	For the Year Ended December 31, 2018

Outstanding, December 31, 2017		74,750		$	14.90		4.9

Granted		429		$	15.48
Vested		(18,850	)		14.90
Forfeited or expired		(6,500	)		14.90

Outstanding, December 31, 2018		49,829		$	14.90		4.0

	For the Year Ended December 31, 2017

Outstanding, December 31, 2016		-

Granted		74,750	$	14.90
Vested		-
Forfeited or expired		-

Outstanding, December 31, 2017		74,750	$	14.90	4.9

As of

December 31, 2018,

there was

$461,000

and

$723,000

of total unrecognized equity-based expense related to unvested stock options and restricted stock awards granted under the

2017

Equity Incentive Plan, respectively, that is expected to be recognized over a weighted average period of

years.