Note 6 - Stock-Based Compensation

We have maintained a stock-based compensation plan for directors, officers, and other key employees of the Company. The aggregate number of shares of common stock that could be issued with respect to the awards granted under the 2008 plan was 500,000 plus any shares forfeited under the Company’s old stock-based compensation plan. Under the terms of the 2008 stock-based compensation plan, the Company had the ability to grant various stock compensation incentives, including stock options, stock appreciation rights, and restricted stock. The 2008 stock-based compensation was granted under terms and conditions determined by the Compensation Committee of the Board of Directors. Under the 2008 stock-based compensation plan, stock options generally had a maximum term of ten years, and were granted with an exercise price at least equal to the fair market value of the common stock on the date the options were granted. Generally, options granted to directors, officers, and employees of the Company vested over a five-year period, although the Compensation Committee had the authority to provide for different vesting schedules. The ability to grant new options from the 2008 plan expired in March of 2018. The 2019 Equity Incentive Plan, with similar provisions as the 2008 plan and 500,000 shares available for grant was approved at the stockholders’ meeting in May of 2019. No shares have been granted from this plan as of September 30, 2019.

We account for stock-based compensation in accordance with FASB Accounting Standards Codification (“ASC”) Topic 718, Compensation – Stock Compensation, which requires all share-based payments to employees, including grants of employee stock options, to be recognized as compensation expense in the Statement of Income at fair value. Additionally, we are required to recognize the expense of employee services received in share-based payment transactions and measure the expense based on the grant date fair value of the award. The expense is recognized over the period during which an employee is required to provide service in exchange for the award. Stock-based compensation expense included in the consolidated Statements of Income for the three months ended September 30, 2019 and 2018 totaled $32,000 and $56,000, respectively. Stock-based compensation expense included in the consolidated Statements of Income for the nine months ended September 30, 2019 and 2018 totaled $109,000 and $169,000, respectively.

Information regarding our stock-based compensation plan is as follows as of and for the nine months ended September 30:


	2019						2018
				Weighted-						Weighted-
		Weighted-		Average	Aggregate			Weighted-		Average	Aggregate
		Average		Remaining	Intrinsic			Average		Remaining	Intrinsic
	Number	Exercise		Contractual	Value		Number	Exercise		Contractual	Value
	of Shares	Price		Term (in years)	(in thousands)		of Shares	Price		Term (in years)	(in thousands)
Outstanding at beginning of period	349,023	$	6.32				434,025	$	5.87
Granted	—		—				6,500		7.41
Exercised	(17,961)		5.39				(24,877)		3.98
Forfeited	(54,000)		6.58				(2,600)		5.78
Outstanding at end of period	277,062	$	6.33	2.6	$	461	413,048	$	6.01	5.8	$	1,565
Exercisable at end of period	185,970	$	5.94	2.0	$	383	229,687	$	5.26	5.7	$	1,043

The cash received from the exercise of stock options amounted to $16,000 and $3,000 for the three months ended September 30, 2019 and 2018, respectively, and $97,000 and $100,000 for the nine months ended September 30, 2019 and 2018, respectively.

The stock-based compensation expense amounts and fair values of options at the time of the grants were derived using the Black-Scholes option-pricing model. The following weighted average assumptions were used to value options granted for the nine months ended September 30, 2018. There were no options granted in 2019.


Expected life		5.5 years
Risk-free interest rate		2.67	%
Expected volatility		32.20	%
Expected dividend yield		—
Weighted average per share fair value of options granted	$	2.57

As of September 30, 2019, there was $290,305 of total unrecognized stock-based compensation expense related to nonvested stock options, which is expected to be recognized over the next 48 months.