Stock Options

In 2014, the Company adopted the 2014 Equity Incentive Plan designed to help the Company attract, retain, and motivate employees and non-employee directors. Incentive stock options, non-qualified stock options, and restricted stock may be granted as part of the plan.

As of January 1, 2019, the Company had a total of 263,700 stock options outstanding. During the period ended March 31, 2019, the Company issued 160,000 stock options with a strike price of $42.01 to a group of employees. The options granted in 2019 all expire ten years from the grant date. Of the 160,000 grants awarded in 2019, 80,600 of the options have a three year vesting period while the remaining 79,400 options vest in five years.



Stock Options Granted
Date	Shares	Forfeited		Outstanding	Strike Price		Vesting Period	Expiration
March 15, 2019	80,600	—		80,600	$	42.01	3 years	10 years
March 15, 2019	79,400	—		79,400	42.01		5 years	10 years
August 24, 2018	50,200	—		50,200	46.00		3 years	10 years
August 24, 2018	99,500	—		99,500	46.00		5 years	10 years
January 5, 2018	12,500	—		12,500	45.11		3 years	10 years
January 5, 2018	12,500	—		12,500	45.11		5 years	10 years
March 24, 2017	46,250	(4,500	)	41,750	44.21		3 years	10 years
March 24, 2017	23,750	—		23,750	44.21		5 years	10 years
August 27, 2015	38,750	(15,250	)	23,500	42.03		5 years	10 years

A summary of stock option activity is presented below:



	March 31, 2019			March 31, 2018
	Shares	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
Outstanding, beginning of year	263,700	$	45.12	93,500	$	43.59
Granted	160,000	42.01		25,000	45.11
Exercised	—	—		—	—
Forfeited	—	—		—	—
Expired	—	—		—	—
Outstanding, end of period	423,700	$	43.94	118,500	$	43.91

Exercisable, end of period	—	$	—	—	$	—

The estimated fair value of options, including the effect of estimated forfeitures, is recognized as expense on a straightline basis over the options’ vesting periods while ensuring that the cumulative amount of compensation cost recognized at least equals the value of the vested portion of the award at that date. The Company determines the fair value of options granted using the Black-Scholes option-pricing model. The risk-free interest rate is based on the United States Treasury bond with a similar term to the expected life of the options at the grant date. Expected volatility was estimated based on the adjusted historic volatility of the Company’s shares. The expected life was estimated to equal the contractual life of the options. The dividend yield rate was based upon recent historical dividends paid on shares.

Compensation expense for stock options is recognized using the fair value when the stock options are granted and is amortized over the options' vesting period. Compensation expense related to stock options was $136,000 for the three months ended March 31, 2019 compared to $7,000 for the same period of 2018. As of March 31, 2019, no stock options were exercisable and the weighted average years to expiration was 9.19 years. The fair value of options granted during the three months ended March 31, 2019 was approximately $1,208,000 or $7.55 per award. Total unrecognized compensation cost for non-vested options was $2,528,000 and will be recognized over their weighted average remaining vesting period of 3.69 years.