NOTE

17.

SHAREHOLDERS’ EQUITY AND STOCK PLANS

January 31, 2019

we issued

1,834,142

shares of common stock, and paid

$15.3

million in cash as part of our acquisition of Merchants Holding Company (“Merchants”). Merchants shareholders now hold, in the aggregate, approximately

10%

of our outstanding common stock. The acquisition added

$85.3

million in loans,

$190.2

million in deposits and

$107.4

million in investment securities after fair value adjustments to our bank as of

January 31, 2019.

See Note

Acquisition

in these

Notes to Consolidated Financial Statements

for additional information on the acquisition

May 10, 2017,

we completed the sale of

2,738,096

shares of our common stock at a public offering price of

$10.50

and received net proceeds of

$26.8

million. These proceeds were used to fund our acquisition of Merchants Holding Company and to repay certain borrowings.

Stock Plans –

The

2008

Stock Option Plan was approved by the Holding Company’s shareholders on

May 15, 2007 (

“the Plan”). The Plan was amended and restated by the

2010

Equity Incentive Plan which was approved by the Holding Company’s shareholders on

May 18, 2010.

A further amendment and restatement of the Plan was approved by the Holding Company’s shareholders on

May 15, 2012.

The Plan provides for equity awards including stock options, restricted stock and restricted stock units which

may

constitute incentive stock options (“ISO”) under Section

422

(a) of the Internal Revenue Code of

1986,

as amended, or non-statutory stock options (“NSO”) to key personnel of the Company, including Directors. The Plan provides that ISO and NSO under the Plan

may

not

be granted at less than

100%

of fair market value of the Holding Company’s common stock on the date of the grant. Vesting

may

be accelerated in case of an option holder’s death, disability, and retirement or in case of a change of control. At

December 31, 2018,

approximately

152

thousand common shares were available for future grants under the Plan.

We recognized

$46

thousand in tax benefits from vesting of restricted stock and

$216

thousand in proceeds from stock options exercised during the year ended

December 31, 2018.

Proceeds from stock options exercised were

$245

thousand and

$10

thousand for the years ended

December 31, 2017

and

2016,

respectively.

Stock Option Activity

There were

new stock options awarded during the

three

years ended

December 31, 2018.

The following tables summarize information about stock option activity for the years ended

December 31, 2018,

2017

and

2016.

				Weighted				Weighted
				Average		Aggregate		Average
	Number			Exercise		Intrinsic		Remaining
	of Shares			Price		Value		Contractual Term
Options outstanding December 31, 2016		188,900		$	5.08	$	834,625		5.66
Exercised		(51,900	)	$	4.73	$	245,450		4.42
Forfeited		(2,500	)	$	4.05	$	n/a		n/a
Options outstanding December 31, 2017		134,500		$	5.24	$	704,350		4.76
Exercised		(37,100	)	$	5.82	$	215,685		2.96
Forfeited		—		$	—	$	n/a		n/a
Options outstanding December 31, 2018		97,400		$	5.02	$	488,665		4.11

Exercisable at December 31, 2018		93,400		$	4.98	$	465,345		4.03

	For the Years Ended December 31,
(Amounts in thousands, except per share information)	2018		2017		2016
Stock option expense	$	8	$	23	$	24

	At December 31,
	2018		2017		2016
Unrecognized compensation costs related to non-vested stock option payments	$	—	$	17	$	29
Number of exercisable shares		93		119		157

Stock options vest at

20%

per year from the date of the grant. The unrecognized compensation costs are expected to be recognized over a weighted average period of

two

years.

Restricted Stock Activity

The following tables summarize information about unvested restricted shares and restricted shares granted for the years ended

December 31, 2018,

2017

and

2016.

				Weighted				Weighted
				Average		Aggregate		Average
	Number			Grant		Intrinsic		Remaining
	of Shares			Price		Value		Contractual Term
Unvested restricted shares December 31, 2016		67,180		$	5.84	$	638,210		1.38
Granted		45,070		$	10.35	$	466,328		1.32
Vested		(37,761	)	$	5.79	$	218,600		n/a
Unvested restricted shares December 31, 2017		74,489		$	8.60	$	640,255		1.03
Granted		29,913		$	11.50	$	344,000		1.07
Vested		(37,634	)	$	7.53	$	283,433		n/a
Unvested restricted shares December 31, 2018		66,768		$	10.50	$	700,820		0.97

	For the Years Ended December 31,
(Amounts in thousands, except per share information)	2018		2017		2016
Restricted stock compensation expense	$	185	$	196	$	215
Restricted stock awards weighted average grant date fair value per share	$	11.50	$	10.35	$	5.74

	At December 31,
	2018		2017		2016
Unrecognized compensation costs related to non-vested restricted stock payments	$	470	$	414	$	205

Restricted shares vest over a

three

five

year service period. Unvested restricted shares have

dividend or voting rights. The unrecognized compensation costs are expected to be recognized over a weighted average period of

two

years.

Stock Grant Activity

The following tables summarize information about shares granted as employee compensation for the years ended

December 31, 2018

and

2017.

			Weighted		Stock
			Average		Grant
	Number		Grant		Compensation
	of Shares		Price		Expense
Shares granted during the year ended December 31, 2018		4,653	$	11.50	$	53,510
Shares granted during the year ended December 31, 2017		4,868	$	10.05	$	48,923

Dividends

Presented below is a summary of cash dividends paid to common shareholders, recorded as a reduction of retained earnings. The holders of unvested restricted stock awards are

not

entitled to dividends on unvested shares. On

December 19, 2018,

we declared a cash dividend of

$0.04

per share, payable on

January 11, 2019

to shareholders of record at the close of business on

January 2, 2019.

	For the Years Ended December 31,
(Amounts in thousands, except per share information)	2018		2017		2016
Cash dividends paid to common shareholders	$	2,274	$	1,776	$	1,603
Cash dividends paid per common share	$	0.14	$	0.12	$	0.12