Stock-Based Compensation

6 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

The Company recorded total stock-based compensation expense of $895,000 and $801,000 for the three months ended June 30, 2020 and 2019, respectively, and $1,408,000 and $1,202,000 for the six months ended June 30, 2020 and 2019, respectively, which includes the value of stock grants to directors as discussed below. The Company recognized $206,000 and $184,000 of income tax benefits related to stock-based compensation expense in the income statement for the three months ended June 30, 2020 and 2019, respectively, and $324,000 and $246,000 for the six months ended June 30, 2020 and 2019, respectively.

At June 30, 2020, the sole equity-based compensation plan for the Company is the First Bancorp 2014 Equity Plan (the "Equity Plan"), which was approved by shareholders on May 8, 2014. As of June 30, 2020, the Equity Plan had 576,614 shares remaining available for grant.

The Equity Plan is intended to serve as a means to attract, retain and motivate key employees and directors and to associate the interests of the plans' participants with those of the Company and its shareholders. The Equity Plan allows for both grants of stock options and other types of equity-based compensation, including stock appreciation rights, restricted stock, restricted performance stock, unrestricted stock, and performance units.

Recent equity awards to employees have been made in the form of shares of restricted stock with service vesting conditions only. Compensation expense for these awards is recorded over the requisite service periods. Upon forfeiture, any previously recognized compensation cost is reversed. Upon a change in control (as defined in the plans), unless the awards remain outstanding or substitute equivalent awards are provided, the awards become immediately vested.

Certain of the Company’s equity grants contain terms that provide for a graded vesting schedule whereby portions of the award vest in increments over the requisite service period. The Company recognizes compensation expense for awards with graded vesting schedules on a straight-line basis over the requisite service period for each incremental award. Compensation expense is based on the estimated number of stock options and awards that will ultimately vest. Over the past five years, there have been insignificant amounts of forfeitures, and therefore the Company assumes that all awards granted with service conditions only will vest. The Company issues new shares of common stock when options are exercised.

In addition to employee equity awards, the Company's practice is to grant common shares, valued at approximately $32,000 to each non-employee director (currently eleven in total) in June of each year. Compensation expense

associated with these director awards is recognized on the date of award since there are no vesting conditions. On June 1, 2020, the Company granted 14,146 shares of common stock to non-employee directors (1,286 shares per director), at a fair market value of $24.87 per share, which was the closing price of the Company's common stock on that date, and resulted in $352,000 in expense. On June 1, 2019, the Company granted 9,030 shares of common stock to non-employee directors (903 shares per director), at a fair market value of $35.41 per share, which was the closing price of the Company's common stock on that date, and resulted in $320,000 in expense. The expense associated with director grants is classified as "other operating expense" in the Consolidated Statements of Income.

The following table presents information regarding the activity for the first six months of 2020 related to the Company’s outstanding restricted stock:



	Long-Term Restricted Stock
	Number of Units		Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2020	159,366		$	36.79
Granted during the period	41,966		28.58
Vested during the period	(2,790	)	36.26
Forfeited or expired during the period	—		—

Nonvested at June 30, 2020	198,542		$	35.06

Total unrecognized compensation expense as of June 30, 2020 amounted to $3,034,000 with a weighted-average remaining term of 1.9 years. For the nonvested awards that are outstanding at June 30, 2020, the Company expects to record $1,853,000 in compensation expense in the next twelve months, $1,017,000 of which is expected to be recorded in the remaining quarters of 2020.

Prior to 2010, stock options were the primary form of stock-based compensation utilized by the Company. At June 30, 2020, there were no stock options outstanding. During both the three and six months ended June 30, 2020, there were no stock option exercises. During the three and six months ended June 30, 2019, there were $129,000 in stock option exercises.