14. STOCK PLANS AND STOCK BASED COMPENSATION

In January 2015, the Company’s Board of Directors adopted the Republic Bancorp, Inc. 2015 Stock Incentive Plan (the “2015 Plan”), which became effective April 2015 when the Company’s shareholders approved the 2015 Plan. The 2015 Plan replaced the Company’s 2005 Stock Incentive Plan, which expired March 2015.

The number of authorized shares under the 2015 Plan is fixed at 3,000,000, with such number subject to adjustment in the event of certain events, such as stock dividends, stock splits or the like. There is a minimum three-year vesting period for awards granted to employees under the 2015 Plan that vest based solely on the completion of a specified period of service, with options generally exercisable five to six years after the issue date. Stock options generally must be exercised within one year from the date the options become exercisable and have an exercise price that is at least equal to the fair market value of the Company’s stock on their grant date.

All shares issued under the above-mentioned plans were from authorized and reserved unissued shares. The Company has a sufficient number of authorized and reserved unissued shares to satisfy all anticipated option exercises. There are no Class B stock options outstanding or available for exercise under the Company’s plans.

Stock Options

The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes based stock option valuation model. This model requires the input of subjective assumptions that will usually have a significant impact on the fair value estimate. Expected volatilities are based on historical volatility of Republic’s stock and other factors. Expected dividends are based on dividend trends and the market price of Republic’s stock price at grant. Republic uses historical data to estimate option exercises and employee terminations within the valuation model. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve at the time of grant.

All share-based payments to employees, including grants of employee stock options, are recognized as compensation expense over the service period (generally the vesting period) in the consolidated financial statements based on their fair values.

The following table summarizes stock option activity from January 1, 2015 through September 30, 2016:


				Weighted
		Weighted		Average
	Options	Average		Remaining	Aggregate
	Class A	Exercise		Contractual	Intrinsic
	Shares	Price		Term	Value

Outstanding, January 1, 2015	155,000	$	20.15
Granted	323,400		24.51
Exercised	(97,750)		19.77
Forfeited or expired	(57,250)		21.43
Outstanding, December 31, 2015	323,400	$	24.40	4.70	$	650,000

Outstanding, January 1, 2016	323,400	$	24.40
Granted	5,000		26.43
Exercised	(4,000)		20.12
Forfeited or expired	(11,800)		24.47
Outstanding, September 30, 2016	312,600	$	24.49	4.03	$	2,061,211

Fully vested and expected to vest	312,600	$	24.49	4.03	$	2,061,211
Exercisable (vested) at September 30, 2016	4,000	$	20.77	0.47	$	41,240

Information related to stock options for each period follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share data)	2016		2015		2016		2015

Intrinsic value of options exercised	$	—	$	26	$	18	$	81
Cash received from options exercised, net of shares redeemed		—		125		80		244
Weighted-average fair value per share of options granted		—		3.52		3.27		3.58

Restricted Stock Awards

Restricted stock awards generally vest five to six years after issue, with accelerated vesting due to “change in control” or “death or disability of a participant” as defined and outlined in the 2015 Plan.

The following table summarizes restricted stock awards activity from January 1, 2015 through September 30, 2016:


		Weighted-average
	Restricted	grant date fair
	Stock Awards	value per share
Outstanding, January 1, 2015	80,500	$	19.85
Granted	2,500		25.19
Forfeited	(4,000)		19.85
Earned and issued	—		—
Outstanding, December 31, 2015	79,000	$	20.02

Outstanding, January 1, 2016	79,000	$	20.02
Granted	—		—
Forfeited	(2,000)		19.85
Earned and issued	—		—
Outstanding, September 30, 2016	77,000	$	20.02

Fully vested and expected to vest	77,000	$	20.02
Vested at September 30, 2016	—	$	—

Performance Stock Units

The Company first granted performance stock units (“PSUs”) under the 2015 Plan in January 2016. Shares of stock underlying the PSUs may be earned over a four-year performance period commencing on January 1, 2017 and ending on December 31, 2020 as follows:

If the Company achieves a Return on Average Assets (“ROAA”), as defined in the award agreement, of 1.25% for a calendar year in the performance period, then between March 1 and March 15 of the following year, provided that the recipient is still employed in good standing on the payment date, the Company will issue shares of fully-vested stock to the participant equal to 50% of the number of the PSUs initially granted to the participant; and

If the ROAA of 1.25% is met again at the end of another calendar year during the remaining term of the performance period, the Company will similarly issue fully vested stock in an amount equal to the remaining 50% of the initial PSUs granted to the participant.

The following table summarizes PSU activity from January 1, 2016 through September 30, 2016:


		Weighted-average
	Performance	grant date fair
	Stock Units	value per share
Outstanding, January 1, 2016	—	$	—
Granted	55,000		23.08
Forfeited	—		—
Earned and issued	—		—
Outstanding, September 30, 2016	55,000	$	23.08

Fully vested and expected to vest	55,000	$	23.08
Vested at September 30, 2016	—	$	—

Expense Related to the 2015 Stock Incentive Plan

The Company recorded expense related to the 2015 Plan for the three and nine months ended September 30, 2016 and 2015 as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2016		2015		2016		2015

Stock option expense	$	58	$	48	$	184	$	104
Restricted stock award expense		72		60		189		207
Performance stock unit expense		127		—		381		—
Total expense	$	257	$	108	$	754	$	311

Unrecognized expenses related to unvested awards (net of estimated forfeitures) under the 2015 Plan are estimated as follows:


	Stock			Restricted	Performance
(in thousands)	Options			Stock Awards	Stock Units		Total

2016	$	64	$	71	$	127	$	262
2017		253		258		507		1,018
2018		251		120		198		569
2019		143		12		—		155
2020		32		8		—		40
2021		1		2		—		3
Total	$	744	$	471	$	832	$	2,047