Stock-Based Compensation

6 Months Ended

Jun. 30, 2017


	NOTE 6 - STOCK-BASED COMPENSATION

The Company has stock-based incentive arrangements to attract and retain key personnel. In May 2015, the 2015 Equity Compensation Plan (the “Plan”) was approved by shareholders, which authorizes the issuance of restricted stock, stock appreciation rights, stock units and stock options to the Board of Directors and key employees. Compensation expense for service-based awards is recognized over the vesting period. Performance-based awards are recognized based on a vesting schedule and the probability of achieving goals specified at the time of the grant. The 2015 Plan replaced the 2005 Equity Compensation Plan.

Stock-based compensation expense totaled $171,000 and $284,000, respectively, for the three and six months ended June 30, 2017 and $79,000 and $160,000, respectively, for the three and six months ended June 30, 2016. Stock-based compensation expense consisted of the vesting of grants of restricted stock.

All outstanding options are fully vested and the Company has not granted any stock options since 2007. All outstanding options as of June 30, 2017 expire on July 17, 2017. The fair value of the Company’s outstanding employee stock options is estimated on the date of grant using the Black-Scholes option pricing model. The Company estimates expected market price volatility and expected term of the options based on historical data and other factors.

The exercise price for options granted is set at the discretion of the committee administering the Plan, but is not less than the market value of the shares as of the date of grant. An option’s maximum term is 10 years and the options vest at the discretion of the committee.

The following tables below summarize outstanding and exercisable options at June 30, 2017 and December 31, 2016.


		Weighted		Weighted-Average
		Average	Aggregate	Contractual Life
		Exercise	Intrinsic	Remaining In
(dollars in thousands, except per share amounts)	Shares	Price	Value	Years

Outstanding at January 1, 2017	15,081	$ 27.70	$ -
Exercised	(13,181)	27.70	123
Forfeited	(500)	27.70	-

Outstanding at June 30, 2017	1,400	$ 27.70	$ 15	0.3

Exercisable at June 30, 2017	1,400	$ 27.70	$ 15	0.3


		Weighted		Weighted-Average
		Average	Aggregate	Contractual Life
		Exercise	Intrinsic	Remaining In
(dollars in thousands, except per share amounts)	Shares	Price	Value	Years

Outstanding at January 1, 2016	21,211	$ 27.70	$ -
Forfeited	(6,130)	27.70

Outstanding at December 31, 2016	15,081	$ 27.70	$ 20	0.5

Exercisable at December 31, 2016	15,081	$ 27.70	$ 20	0.5

Options outstanding are all currently exercisable and are summarized as follows:


Shares Outstanding	Weighted Average	Weighted Average
June 30, 2017	Remaining Contractual Life	Exercise Price
1,400	less than 1 year	$	27.70

The aggregate intrinsic value of outstanding stock options and exercisable stock options was $15,000 at June 30, 2017 and $20,000 at December 31, 2016. Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the period, which was $38.50 and $29.00 per share at June 30, 2017 and December 31, 2016, respectively, and the exercise price multiplied by the number of options outstanding.

The Company granted restricted stock in accordance with the Plan. The vesting period for outstanding granted restricted stock is between three and five years. As of June 30, 2017 and December 31, 2016, unrecognized stock compensation expense was $751,000 and $810,000, respectively. The following tables summarize the unvested restricted stock awards outstanding at June 30, 2017 and December 31, 2016, respectively.


	Restricted Stock

	Number of Shares	Weighted Average Grant Date Fair Value

Nonvested at January 1, 2017	47,881	$ 20.41
Granted	6,752	30.20
Vested	(20,271)	20.09
Cancelled	(86)	20.75

Nonvested at June 30, 2017	34,276	$ 22.53


	Restricted Stock
	Number of Shares	Weighted Average Grant Date Fair Value

Nonvested at January 1, 2016	37,048	$ 19.83
Granted	27,403	21.00
Vested	(15,912)	20.09
Cancelled	(658)	20.31

Nonvested at December 31, 2016	47,881	$ 20.41

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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