Stock-Based Compensation Plans

3 Months Ended

Mar. 31, 2018

Equity-Based Compensation Plans [Abstract]

Stock-Based Compensation Plans

Note 5 – Stock-Based Compensation Plans

The Company recorded total stock-based compensation expense of $231,000 and $178,000 for the three months ended March 31, 2018 and 2017, respectively. Stock based compensation is reflected as an adjustment to cash flows from operating activities on the Company’s consolidated statement of cash flows. The Company recognized $54,000 and $66,000 of income tax benefits related to stock based compensation expense in its consolidated income statement for the three months ended March 31, 2018 and 2017, respectively.

At March 31, 2018, the Company had the following stock-based compensation plans: the First Bancorp 2014 Equity Plan and the First Bancorp 2007 Equity Plan. The Company’s shareholders approved all equity-based compensation plans. The First Bancorp 2014 Equity Plan became effective upon the approval of shareholders on May 8, 2014. As of March 31, 2018, the First Bancorp 2014 Equity Plan was the only plan that had shares available for future grants, and there were 796,182 shares remaining available for grant.

The First Bancorp 2014 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 Plan’s participants with those of the Company and its shareholders. The First Bancorp 2014 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 grants to employees have either had performance vesting conditions, service vesting conditions, or both. Compensation expense for these grants is recorded over the various service periods based on the estimated number of equity grants that are probable to vest. No compensation cost is recognized for grants that do not vest and any previously recognized compensation cost will be reversed. The Company issues new shares of common stock when options are exercised.

Certain of the Company’s stock option 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 only been minimal amounts of forfeitures, and therefore the Company assumes that all awards granted without performance conditions will become vested.

As it relates to director equity grants, the Company grants common shares, valued at approximately $32,000 to each non-employee director (currently 11 in total) in June of each year. Compensation expense associated with these director grants is recognized on the date of grant since there are no vesting conditions.

The Company’s senior officers receive their annual bonuses earned under the Company’s annual incentive plan in a mix of 50% cash and 50% stock, with the stock being subject to a three year vesting term. In the last three years, a total of 54,861 shares of restricted stock have been granted related to performance in the preceding fiscal years. Total compensation expense associated with those grants was $907,000 and is being recognized over the respective vesting periods. The Company recorded $74,000 and $69,000 in compensation expense during the three months ended March 31, 2018 and 2017, respectively, related to these grants and expects to record $74,000 in compensation expense during each remaining quarter of 2018.

In the last three years, the Compensation Committee also granted 88,494 shares of stock to various employees of the Company to promote retention. The total value associated with these grants amounted to $2.0 million, which is being recorded as an expense over their three year vesting periods. For the three months ended March 31, 2018 and 2017, total compensation expense related to these grants was $155,600 and $109,000, respectively. The Company expects to record $154,000 in compensation expense during each remaining quarter of 2018. All grants were issued based on the closing price of the Company’s common stock on the date of the grant.

The following table presents information regarding the activity the first three months of 2018 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, 2018		103,063	$	24.08
Granted during the period		13,485		35.29
Vested during the period		—		—
Forfeited or expired during the period		—		—
Nonvested at March 31, 2018		116,548	$	25.37

In years prior to 2009, stock options were the primary form of equity grant utilized by the Company. The stock options had a term of ten years. 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.

At March 31, 2018, there were 29,181 stock options outstanding related to the Company’s two equity-based plans, with exercise prices ranging from $14.35 to $16.81.

The following table presents information regarding the activity for the first three months of 2018 related to the Company’s stock options outstanding:

	Options Outstanding
	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Contractual Term (years)		Aggregate Intrinsic Value
Balance at January 1, 2018		38,689		$	16.09
Granted		—			—
Exercised		(9,508	)		16.60			$	184,018
Forfeited		—			—
Expired		—			—
Outstanding at March 31, 2018		29,181		$	15.92		0.5	$	575,671
Exercisable at March 31, 2018		29,181		$	15.92		0.5	$	575,671

During the three months ended March 31, 2018 and 2017, the Company received $108,000 and $45,000, respectively, as a result of stock option exercises.