Stock-Based Compensation Plans

3 Months Ended

Mar. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation Plans

(7) Stock-Based Compensation Plans. The Company has two Stock Option Plans (the 2006 Stock Incentive Plan and the 2016 Equity Incentive Option Plan) under which options for shares of common stock were granted to directors, officers and key employees. The 2016 plan permits the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock units, or stock awards. The options awarded under the plans have similar characteristics. All stock options are non-qualified and expire ten years from the date of grant. Stock based compensation awarded to directors, officers and employees are exercisable immediately or become exercisable in cumulative installments of 20% or 25% at the end of each year following the date of grant. When stock options are exercised the Company issues new shares after receipt of exercise proceeds and taxes due, if any, from the grantee. The number of common shares available for future issuance was 544,217 at March 31, 2018.

The Company utilizes the Black-Scholes valuation model for estimating fair value of stock compensation for options awarded to officers and employees. Each grant is evaluated based upon assumptions at the time of grant. The assumptions were no dividend yield, expected volatility between 32% and 43%, risk-free interest rate of .6% to 4.2% and expected life of 3.0 to 7.0 years.

The dividend yield of zero is based on the fact that the Company does not pay cash dividends and has no present intention to pay cash dividends. Expected volatility is estimated based on the Company’s historical experience over a period equivalent to the expected life in years. The risk-free interest rate is based on the U.S. Treasury constant maturity interest rate at the date of grant with a term consistent with the expected life of the options granted. The expected life calculation is based on the observed and expected time to exercise options by the employees.

As previously disclosed, Thompson S. Baker II resigned from his position as CEO and from the board of directors on March 13, 2017. In recognition of his outstanding service to the Company, the Board approved the vesting of all of Mr. Baker's outstanding FRP stock options, which expired 90 days following the termination of his employment. The vesting of Mr. Baker’s outstanding FRP options that were issued prior to the spin-off required Patriot to record modification stock compensation expense of $150,000. FRP reimbursed Patriot for this cost under the transition services agreement. The vesting of Mr. Baker’s outstanding FRP options that were issued subsequent to the spin-off required modified stock compensation expense of $41,000.

The Company recorded the following stock compensation expense in its consolidated statements of income (in thousands):

	Three Months ended
	March 31,
	2018		2017
Stock option grants	$	41		77
Annual director stock award		—		445
	$	41		522

A summary of changes in outstanding options is presented below (in thousands, except share and per share amounts):

			Weighted		Weighted		Weighted
	Number		Average		Average		Average
	Of		Exercise		Remaining		Grant Date
Options	Shares		Price		Term (yrs)		Fair Value(000's)
Outstanding at
January 1, 2018		174,510	$	28.70		6.0	$	1,901
Granted		—	$	—			$	—
Exercised		—	$	—			$	—
Outstanding at
March 31, 2018		174,510	$	28.70		5.8	$	1,901
Exercisable at
March 31, 2018		130,827	$	25.74		4.9	$	1,238
Vested during
three months ended
March 31, 2018		911					$	15

The aggregate intrinsic value of exercisable in-the-money options was $3,959,000 and the aggregate intrinsic value of outstanding in-the-money options was $4,763,000 based on the market closing price of $56.00 on March 29, 2018 less exercise prices.

The unrecognized compensation cost of options granted to FRP employees but not yet vested as of March 31, 2018 was $541,000, which is expected to be recognized over a weighted-average period of 3.9 years.

There were no gains realized by option holders during the three months ended March 31, 2018.