The Company has an equity-based incentive plan, the Bay Banks of Virginia, Inc. 2013 Stock Incentive Plan (the “2013 Plan”), which provides for the grant of up to 385,000 shares of the Company’s common stock as awards to employees and members of the board of directors of the Company and its subsidiaries. Prior to shareholder approval of the 2013 Plan, the Company issued equity awards from several other shareholder-approved plans. As of December 31, 2019, there were 113,280 shares available for grant under the 2013 Plan.

Share-based compensation expense related to stock options and restricted stock granted under the 2013 Plan for the years ended December 31, 2019 and 2018 was $396 thousand and $102 thousand, respectively.

During 2019, options for a total of 49,500 shares were granted, which vested immediately. During 2018, options for a total of 17,500 shares were granted, which vested either immediately or over one to three years. Compensation expense for stock options is based on the estimated fair value of options granted using the Black-Scholes Model and is amortized on a straight-line basis over the vesting period of the award. The expected volatility used in the Black-Scholes Model calculations is based on the historical volatility of the Company’s common stock price. The risk-free interest rates for the periods within the contractual life of the awards are based on the U.S. Treasury yield curve in effect at the time of the grant. The expected life is based on historical exercise experience, and the dividend yield assumption is based on the Company’s history and expectation of dividend payouts. The fair value of options granted during 2019 ranged from $1.49 to $1.64 per option share. The fair value of options granted during 2018 ranged from $1.78 to $2.09 per option share.

The following table presents the variables used in the Black-Scholes Model calculations of the fair value of the stock options for the periods presented.

				Weighted Average		Weighted Average Remaining		Aggregate
	Shares			Exercise Price		Contractual Life (in years)		Intrinsic Value (1)
Options outstanding and exercisable, January 1, 2018		251,026		$	7.43		6.73	$	753,229
Granted		17,500			9.97
Forfeited		(6,805	)		10.37
Exercised		(25,491	)		5.84
Expired		(9,459	)		11.20
Options outstanding, December 31, 2018		226,771		$	7.56		6.43	$	223,478
Granted		49,500			8.11
Forfeited		(32,276	)		9.15
Exercised		(15,578	)		5.83
Expired		(5,761	)		7.61
Options outstanding, December 31, 2019		222,656		$	7.58		6.41	$	342,650
Options exercisable, December 31, 2019		214,329		$	7.49

(1)

The aggregate intrinsic value of a stock option in the table above represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) that would have been received by the option holders had all option holders exercised their options as of the respective years ended. This amount changes based on changes in the market value of the Company’s common stock.

The following table presents restricted stock activity for the periods presented.

				Weighted Average
	Shares			Fair Value
Restricted stock nonvested, January 1, 2018		10,500		$	8.44
Granted		60,856			9.75
Vested		(3,000	)		9.15
Forfeited		(12,298	)		8.93
Restricted stock nonvested, December 31, 2018		56,058		$	9.73
Granted		75,493			8.17
Vested		(12,430	)		9.61
Forfeited		(13,915	)		8.31
Restricted stock nonvested, December 31, 2019		105,206		$	8.81

During 2019 and 2018, the Company granted restricted stock awards totaling $617 thousand and $593 thousand, respectively. As of December 31, 2019, $620 thousand of restricted stock compensation expense remains unrecognized. Shares of restricted stock awarded in 2019 were pursuant to the Company’s long-term incentive plan (“LTIP”), which covers certain officers of the Company. One-half of the LTIP restricted shares vest on a straight-line basis over a three-year period (“LTIP Time-based Shares”), while the other one-half vests at the end of a three-year period contingent on the Company’s achievement of financial goals (“LTIP Performance-based Shares”). The LTIP Time-based Shares are being expensed on a straight-line basis over the three-year vesting period. The LTIP Performance-based Shares are being expensed on a straight-line basis over a three-year period with adjustments periodically based on projected achievement of the performance target. The value of the restricted stock awards is based on the fair market value of the Company’s common stock on the grant date. LTIP Time-based Shares carry voting and dividend rights. LTIP Performance-based Shares accrue dividends, if any, which are paid if, and only if, the shares vest.