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Stock Incentive Plans
12 Months Ended
Dec. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock Incentive Plans

Note 17 – Stock Incentive Plans

At the Annual Shareholders Meeting on May 21, 2014, shareholders approved the Virginia National Bankshares Corporation 2014 Stock Incentive Plan (“2014 Plan”). The 2014 Plan makes available up to 262,500 shares of the Company’s common stock, as adjusted by the 5% Stock Dividend, to be issued to plan participants. Similar to the Company’s 2003 Stock Incentive Plan (“2003 Plan”) and 2005 Stock Incentive Plan (“2005 Plan”), the 2014 Plan provides for granting of both incentive and nonqualified stock options, as well as restricted stock, unrestricted stock and other stock based awards. No new grants will be issued under the 2003 Plan or the 2005 Plan as these plans have expired.

For all of the Company’s stock incentive plans (the “Plans”), the option price of incentive options will not be less than the fair value of the stock at the time an option is granted. Nonqualified options may be granted at prices established by the Board of Directors, including prices less than the fair value on the date of grant. Outstanding options generally expire in ten years from the grant date. Stock options generally vest by the fourth or fifth anniversary of the date of the grant.

A summary of the shares issued and available under each of the Company’s stock incentive plans (the “Plans”) is shown below as of December 31, 2018. Share data and exercise price range per share have been adjusted to reflect the 5% Stock Dividend. Although the 2003 Plan and 2005 Plan have expired and no new grants will be issued under these plans, there were shares issued before the plans expired which are still outstanding as shown below.

2003 Plan 2005 Plan 2014 Plan
Aggregate shares issuable      134,787         241,500      262,500
Options issued, net of forfeited and expired options (113,457 ) (57,019 ) (64,850 )
Cancelled due to Plan expiration (21,330 ) (184,481 ) -
Remaining available for grant - - 197,650
 
Grants issued and outstanding:
Total vested and unvested shares 16,345 1,811 64,325
Fully vested shares 16,345 1,811 -
Exercise price range $     17.39  to $     11.18 to $     28.76 to
  $ 17.39 $ 14.37 $ 44.75

The Company accounts for all of its stock incentive plans under recognition and measurement accounting principles which require that the compensation cost relating to stock-based payment transactions be recognized in financial statements. Stock-based compensation arrangements for 2018 and prior years included stock options and restricted stock. All stock-based payments to employees are required to be valued using a fair value method on the date of grant and expensed based on that fair value over the applicable vesting period. For the years ended December 31, 2018 and 2017, the Company recognized $65,000 and $10,000, respectively, in compensation expense for stock options. As of December 31, 2018, there was $405,000 in unrecognized compensation expense for stock options remaining to be recognized in future reporting periods through 2023.

Stock Options

Changes in the stock options outstanding related to all of the Plans are summarized below. Share and per share data have been adjusted to reflect the 5% Stock Dividend.

December 31, 2018
Weighted Average Aggregate
Number of Options Exercise Price Intrinsic Value
Outstanding at January 1, 2018      46,117      $     19.96      $      793
Issued 62,750 44.34
Exercised                 (12,502 ) 21.39
Expired (13,884 ) 21.53
Forfeited - -
Outstanding at December 31, 2018 82,481 $ 38.02 $ 327
 
Options exercisable at December 31, 2018 18,156 $ 17.00 $ 318

There was an intrinsic value of $252,000 for the options exercised during the year ended December 31, 2018.

The fair value of any option grant is estimated at the grant date using the Black-Scholes pricing model. In 2017, a stock option grant of 2,100 shares, as adjusted to reflect the 5% Stock Dividend, was issued. There were stock option grants of 62,750 shares issued during the year ended December 31, 2018, and the fair value on each option granted was estimated based on the assumptions noted in the following table:

For the year ended For the year ended
December 31, 2018 December 31, 2017
Expected volatility1      15.49%      17.90%
Expected dividends2 1.81% 1.72%
Expected term (in years)3 6.50 6.30
Risk-free rate4 2.85% 2.00%

1      Based on the monthly historical volatility of the Company’s stock price over the expected life of the options.
2 Calculated as the ratio of historical dividends paid per share of common stock to the stock price on the date of grant.
3 Based on the average of the contractual life and vesting period for the respective option.
4 Based upon an interpolated US Treasury yield curve interest rate that corresponds to the contractual life of the option, in effect at the time of the grant.

Summary information pertaining to options outstanding at December 31, 2018 is as follows:

Options Outstanding Options Exercisable
Weighted- Weighted- Weighted-
Number of Average Average Number of Average
Options Remaining Exercise Options Exercise
Exercise Price Outstanding Contractual Life Price Exercisable Price
$11.18 to $20.00      18,156      0.5 Years      $     17.00      18,156      $     17.00
$20.01 to $30.00 1,575 8.2 Years 28.76 0 -
$30.01 to $40.00 - - - 0 -
$40.01 to $44.75 62,750 9.4 Years 44.34 0 -
Total 82,481 7.4 Years $ 38.02 18,156 $ 17.00

Stock Grants

There were no restricted stock grants outstanding throughout 2018 or 2017. No restricted or unrestricted stock grants were awarded during the twelve months of 2018 or 2017. On February 20, 2019, a total of 10,993 shares of unrestricted stock were granted to non-employee directors and certain members of executive management.