18.STOCK-BASED COMPENSATION

Under the HarborOne Bancorp, Inc. 2017 Stock Option and Incentive Plan (the “Equity Plan”), adopted on August 9, 2017, the Company may grant options, stock appreciation rights, restricted stock, restricted units, unrestricted stock awards, cash based awards, performance share awards, and dividend equivalent rights to its directors, officers and employees. Total shares reserved for issuance under the plan are 3,730,146. Both incentive stock options and non-qualified stock options may be granted under the Equity Plan, with the total shares reserved for options equaling 2,664,391. The exercise price of each option equals the market price of the Company’s stock on the date of grant and the maximum term of each option is ten years. The total number of shares reserved for restricted stock or restricted units is 1,065,755. Options and awards vest ratably over three years. The fair value of shares awarded is based on the market price at the date of grant.

Expense related to options and restricted stock granted to directors is recognized within other noninterest expense.

The following table presents the pre-tax expense associated with stock options and restricted stock awards and the related tax benefits recognized for the years presented:


	Year Ended December 31,
	2019		2018		2017
	(in thousands)

Employee compensation expense:
Stock options	$	1,213	$	694	$	600
Restricted stock awards		2,204		2,360		895
Directors' fee expense:
Stock options		572		629		246
Restricted stock awards		860		910		355
Total stock-based compensation expense	$	4,849	$	4,593	$	2,096
Related tax benefits recognized in earnings	$	1,042	$	965	$	589

The Company has standard form agreements used for stock option and restricted stock awards. The standard form agreements used for the Chief Executive Officer and all other executive officers have previously been disclosed in Securities and Exchange Commission filings and generally provide that: (1) any unvested options or unvested restricted stock vest upon a Change in Control, which is an event described in Section 280G of the Internal Revenue Code of 1986; and, that (2) any stock options which vest pursuant to a Change in Control will be cashed out at the difference between the acquisition price and the exercise price of the stock option.

Stock Options

The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model with the following assumptions:

Volatility is based on peer group volatility due to lack of sufficient trading history for the Company.

Expected life represents the period of time that the option is expected to be outstanding, taking into account the contractual term and the vesting period.

Expected dividend yield is based on the Company’s history and expectation of dividend payouts.

The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for a period equivalent to the expected life of the option.

During the years ended December 31, 2019 and 2018, the Company made the following awards of nonqualified options to purchase shares of common stock:


	Year Ended December 31,
	2019		2018		2017

Options granted	583,565		289,890		1,585,924
Vesting period (years)	3		3		3
Term (years)	10		10		10
Weighted average expected volatility	22.09	%	22.16	%	24.00	%
Expected life (years)	6		6		6
Expected dividend yield	—	%	—	%	—	%
Weighted average risk free interest rate	2.46	%	2.93	%	1.88	%
Weighted average fair value per option	$ 2.49		$ 2.83		$ 2.82

A summary of stock option activity for the year ended December 31, 2019 is presented in the table below:


	Outstanding								Nonvested
					Weighted
					Average						Weighted
			Weighted		Remaining		Aggregate				Average
	Stock Option		Average		Contractual		Intrinsic		Stock Option		Grant Date
	Awards		Exercise Price		Term (years)		Value		Awards		Fair Value

Balance at January 1, 2019		1,778,407	$	10.17						1,249,793	$	2.82
Granted		583,565		9.09						583,565		2.49
Vested										(555,622)		2.83
Forfeited		(81,191)		10.20						(81,191)		2.81
Expired		(111,538)		10.23						—		—
Balance at December 31, 2019		2,169,243	$	9.87		8.20	$	2,419,000		1,196,545	$	2.66
Exercisable at December 31, 2019		972,698	$	10.19		7.80	$	—
Unrecognized cost inclusive of directors' awards	$	2,321,000
Weighted average remaining recognition period (years)		1.61

Restricted Stock

Shares issued upon vesting may be either authorized but unissued shares or reacquired shares held by the Company. Any shares not issued because vesting requirements are not met will again be available for issuance under the plan. The fair market value of shares awarded, based on the market price at the date of grant, is unearned compensation to be amortized over the applicable vesting period.

The following table presents the activity in non-vested stock awards under the Equity Plan for the year ended December 31, 2019:


	Restricted		Weighted Average
	Stock Awards		Grant Price

Non-vested stock awards at January 1, 2019		617,293	$	10.24
Vested		(298,484)		10.23
Granted		47,276		9.94
Forfeited		(32,319)		10.20
Non-vested stock awards at December 31, 2019		333,766	$	10.20
Unrecognized cost inclusive of directors' awards	$	2,217,000
Weighted average remaining recognition period (years)		0.92