STOCK-BASED COMPENSATION

Employee Stock Option Plans

The Company’s shareholders approved the 2009 Equity Compensation Program, which authorizes the granting of incentive stock options, supplemental stock options, restricted shares and restricted stock units to employees of the Company, including those employees serving as officers and directors of the Company. The plan authorizes the issuance of up to 2.3 million shares in connection with options and awards granted under the 2009 program. The Company’s stock option grants under this plan expire 10 years from the date of grant, ninety days after termination of service other than for cause, or one year after death or disability of the grantee. In 2014, the Company began issuing restricted stock units (RSUs), some of which have performance conditions attached to them. The Company generally issues shares for option exercises from its treasury stock using the cost method or issues new shares if no treasury shares are available.

The Company established the 2000 Equity Compensation Program which authorizes the granting of incentive stock options, supplemental stock options and restricted stock to employees of the Company, which includes those employees serving as officers and directors of the Company. The plan authorized 2,613,185 shares of common stock of the Company. All of the Company’s stock option grants expire 10 years from the date of grant, thirty days after termination of service other than for cause, or one year after death or disability of the grantee. The Company has no option or restricted stock awards with market or performance conditions attached to them under the 2000 Equity Compensation Program. No further awards will be granted from the 2000 program.

The Company has outstanding stock options issued to its directors as well as options assumed under the Somerset Hills’ stock option plans at the time of merger. As of December 31, 2017 and 2016, respectively, 81,442 and 111,829 options granted to directors were outstanding. As of December 31, 2017 and 2016, there were 20,774 and 23,415 options outstanding, respectively, under the Somerset Hills’ stock option plans.

Excess tax benefits of stock based compensation were $587,000, $43,000 and $59,000 for the years 2017, 2016 and 2015, respectively.

A summary of the status of the Company’s option plans as of December 31, 2017 and the changes during the year ending on that date is represented below.



	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value
Outstanding, beginning of year	135,250		$	8.79	4.18	$	1,450,533
Granted	—		—
Exercised	(33,023	)	9.72
Expired	—		—
Forfeited	(11	)	7.97
Outstanding, end of year	102,216		$	8.49	4.27	$	1,101,806
Options exercisable at year-end	102,216		$	8.49	4.27	$	1,101,806

A summary of the Company’s non-vested options under the Company’s option plans as of December 31, 2017 and changes for the year then ended is presented below.



	Number of Shares		Weighted- Average Grant-date Fair Value
Non-vested, Balance at of January 1, 2017	10,501		$	3.31
Granted	—		—
Vested	(10,501	)	3.31
Non-vested, December 31, 2017	—		$	—

As of December 31, 2017, there was no unrecognized compensation expense related to unvested stock options under the 2009 Equity Compensation Program. Compensation expense recognized for stock options was $14,000, $35,000 and $35,000 for 2017, 2016 and 2015, respectively.

The aggregate intrinsic values of options exercised in 2017 and 2016 were $337,000 and $292,000, respectively. Exercise of stock options during 2017 and 2016 resulted in cash receipts of $321,000 and $285,000, respectively. The total fair value of options that vested in 2017 and 2016 were $35,000 and $35,000, respectively.

Information regarding the Company’s restricted stock for the year ended December 31, 2017 is as follows:



	Number of Shares		Weighted Average Price
Outstanding, Balance at of January 1, 2017	42,875		$	9.72
Granted	13,176		18.20
Vested	(32,904	)	9.79
Forfeited	(165	)	10.34
Outstanding, December 31, 2017	22,982		$	14.44

In 2017, the Company granted 13,176 shares of restricted stock to non-employee directors at a grant date fair value of $18.20 per share under the Company’s 2009 Equity Compensation Program. These shares will vest over a one year period, totaling $240,000 in compensation expense. In 2016, the Company granted 23,952 shares of restricted stock to non-employee directors at a grant date fair value of $10.02 per share under the Company’s 2009 Equity Compensation Program. These shares vested over a one year period, totaling $240,000 in compensation expense. No restricted stock was granted in 2015.

The total fair value of the restricted stock vested during the year ended December 31, 2017 was approximately $322,000. Compensation expense recognized for restricted stock was $287,000, $353,000 and $497,000 in 2017, 2016 and 2015, respectively. There was approximately $6,000 in unrecognized compensation expense related to restricted stock grants as of December 31, 2017, which is expected to be recognized over a period of 0.09 years.

In 2017, the Company granted 132,523 RSUs at a weighted average grant date fair value of $19.92 per share under the Company’s 2009 Equity Compensation Program. These units vest within a range of two to three years. A portion of these RSUs will vest subject to certain performance conditions in the restricted stock unit agreement. There are also certain provisions in the compensation program which state that if a holder of the RSUs reaches a certain age and years of service, the person has effectively earned a portion of the RSUs at that time. Compensation expense on these restricted stock units is expected to average approximately $880,000 per year over a three year period. In 2016, the Company granted 180,926 RSUs at a weighted average grant date fair value of $10.45 per share under the Company’s 2009 Equity Compensation Program. These units vest within a range of two to three years. Compensation expense on these restricted stock units is expected to average approximately $630,000 per year over a three year period. In 2015, the Company granted 137,009 RSUs at a weighted average grant date fair value of $11.08 per share under the Company’s 2009 Equity Compensation Program. Compensation expense on these restricted stock units is expected to average $506,000 per year over a three year period. Compensation expense for restricted stock units was $2.0 million, $1.5 million and $1.1 million in 2017, 2016 and 2015, respectively. There was approximately $1.8 million in unrecognized compensation expense related to restricted stock units as of December 31, 2017, which is expected to be recognized over a period of 1.10 years.

Information regarding the Company’s RSUs and changes during the year ended December 31, 2017 is as follows:



	Number of RSUs		Weighted Average Price
Outstanding, Balance at of January 1, 2017	302,344		$	10.76
Granted	132,523		19.92
Vested	(148,585	)	13.01
Forfeited	(18,550	)	12.45
Outstanding, December 31, 2017	267,732		$	13.93