Stock-Based Compensation Plans

May 20, 2009,

the Company adopted the

2009

Equity Incentive Plan (the

“2009

Plan”) which terminated as of

May 20, 2019.

The

2009

Plan provided for the award of stock options, restricted stock, performance shares and stock appreciation rights. The aggregate number of shares of the Company’s common stock available for issuance under the

2009

Plan could

not

exceed

223,000

shares and

176,150

shares were still available for issuance under the

2009

Plan at its termination.

May 22, 2019,

the Company adopted the

2019

Equity Incentive Plan (the

“2019

Plan”). The

2019

Plan provides for the award of stock options, restricted stock, performance shares and stock appreciation rights. The aggregate number of shares of the Company’s common stock available for issuance under the

2019

Plan

may

not

exceed

176,150

shares. If an award under the

2009

Plan is canceled, terminates, expires, is forfeited or lapses for any reason, any issued shares subject to the award shall

not

be available for issuance pursuant to awards subsequently granted under the

2019

Plan. Further,

additional participants, as that term is defined in the

2009

Plan, are eligible for grants of awards under the

2009

Plan.

September 30, 2019,

176,150

shares of the Company’s common stock were available for issuance under the

2019

Plan. The Company

may

grant both non-statutory and statutory stock options which

may

not

have a term exceeding

ten

years. In the case of incentive stock options, the aggregate fair value of the stock (determined at the time the incentive stock option is granted) for which any optionee

may

be granted incentive options which are

first

exercisable during any calendar year shall

not

exceed

$100,000.

Option prices

may

not

be less than the fair market value of the underlying stock at the date of the grant. An award of a performance share is a grant of a right to receive shares of the Company’s common stock which is contingent upon the achievement of specific performance criteria or other objectives set at the grant date. Stock appreciation rights are equity or cash settled share-based compensation arrangements whereby the number of shares that will ultimately be issued or the cash payment is based upon the appreciation of the Company’s common stock. Awards granted under the

2019

Plan

may

be granted either alone, in addition to, or in tandem with, any other award granted under the

2019

Plan. The terms of the

2019

Plan also include provisions whereby all unearned options and restricted shares become immediately exercisable and fully vested upon a change in control.

The fair market value of stock options granted is estimated at the date of grant using an option pricing model. Expected volatilities are based on historical volatility of the Company's stock. The expected term of options granted represents the period of time that options are expected to be outstanding and is based on historical trends. The risk free rate for the expected life of the options is based on the U.S. Treasury yield curve in effect at the time of grant. As of

September 30, 2019,

stock options had been granted under the plans.

February 19, 2019,

the Company granted

9,750

restricted stock shares under the

2009

Plan to directors, officers and key employees at a grant-date price of

$52.09

per share for a total of

$508,000.

The restricted stock vests ratably from the grant date through

July 1, 2024,

with

20%

of the shares vesting each year on

July 1

beginning

July 1, 2020.

February 20, 2018,

the Company granted

20,000

restricted stock shares under the

2009

Plan to directors, officers and key employees at a grant-date price of

$37.42

per share for a total of

$748,000.

The restricted stock vests ratably from the grant date through

July 1, 2023,

with

20%

of the shares vesting each year on

July 1

beginning

July 1, 2019.

Compensation expense is measured based on the fair market value of the restricted stock at the grant date and is recognized ratably over the period during which the shares are earned (the vesting period). Compensation expense related to restricted stock recognized for the

three

-month and

nine

-month periods ended

September 30, 2019

amounted to

$72,000

and

$190,000,

respectively. Compensation expense related to restricted stock recognized for the

three

-month and

nine

-month periods ended

September 30, 2018

amounted to

$47,000

and

$153,000,

respectively.

A summary of the Company’s nonvested restricted shares under the plans as of

September 30, 2019

and changes during the

nine

-month period then ended is presented below.

			Weighted
	Number		Average
	of		Grant Date
	Shares		Fair Value

Nonvested at January 1, 2019		24,900	$	34.10
Granted		9,750		52.09
Vested		6,900		31.43
Forfeited		-		-

Nonvested at September 30, 2019		27,750	$	41.08

There were

6,900

restricted shares with a total fair value of

$353,000

that vested during the

nine

-month period ended

September 30, 2019.

There were

4,200

restricted shares with a total fair value of

$171,000

that vested during the

nine

-month period ended

September 30, 2018.

September 30, 2019,

there was

$1.0

million of unrecognized compensation expense related to nonvested restricted shares. The compensation expense is expected to be recognized over the remaining vesting period of

4.75

years.