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Note 6 - Stock Option Plans
9 Months Ended
Sep. 30, 2018
Notes to Financial Statements  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
(
6
)
   
Stock Option Plans
 
The
2015
Stock Incentive Compensation Plan (the
“2015
Plan”) was approved by the Shareholders at the Company’s annual meeting of shareholders on
May 20, 2015
and permits the Company to grant the Company’s key employees and directors stock options, stock appreciation rights, performance shares, and phantom stock. Under the
2015
Plan, the number of shares which
may
be issued is
500,000,
but in
no
instance more than
15%
of the issued and outstanding shares of the Company’s common stock.
 
During the
first
quarter of
2018,
the Company issued
15,667
Incentive Stock Options (“ISO”) to its CEO as part of his compensation for the year ended
December 31, 2017.
These options vest
100%
at the date of issuance, and therefore, are expensed immediately.
 
During the
second
quarter of
2018,
the Company issued
120,000
Non-Qualified Stock Options (“NSO”) to its Board of Directors. These NSOs vest over
5
years and expire in increments beginning
April 1, 2024
and concluding
April 1, 2028.
 
During the
second
quarter of
2018,
the Company issued Incentive Stock Options (“ISO”) to its employees. The Company issued
25,000
ISOs to its CEO and
92,250
ISOs to its remaining employees. These ISOs vest over
5
years and expire in increments beginning
April 1, 2024
and concluding
April 1, 2028.
The NSOs and the ISOs issued during the
second
quarter of
2018
were issued in recognition of the Company’s
10
-year anniversary.
 
As of
September 30, 2018,
264,457
stock options have been granted under the
2015
Plan and
204,844
options are available for grant.
 
   
 
 
 
 
 
 
 
 
Weighted-
   
 
 
 
   
 
 
 
 
Weighted-
   
Average
   
 
 
 
   
 
 
 
 
Average
   
Remaining
   
Aggregate
 
   
Number of
   
Exercise
   
Contractual
   
Intrinsic
 
   
Options
   
Price
   
Term
   
Value
 
Outstanding at December 31, 2016
   
-
    $
-
     
 
     
 
 
Options granted
   
11,540
     
17.03
     
 
     
 
 
Outstanding at September 30, 2017
   
11,540
    $
17.03
     
 
     
 
 
Outstanding at December 31, 2017
   
11,540
    $
17.03
     
 
     
 
 
Options granted
   
252,917
     
19.79
     
 
     
 
 
Outstanding at September 30, 2018 (in years)
   
264,457
    $
19.79
     
8.60
    $
430,000
 
Exercisable at September 30, 2018 (in years)
   
37,207
    $
17.93
     
3.05
    $
130,000
 
 
The fair value of shares vested and recognized as compensation expense was
$105,000
and
$15,000
for the
nine
months ended
September 30, 2018
and
2017,
respectively. At
September 30, 2018,
there was
$690,000
in unrecognized compensation expense related to nonvested share-based compensation arrangements granted under the
2015
Plan, with an average remaining life of
54
months.
 
The fair value of each option granted during the
nine
months ended
September 30, 2018
was estimated on the date of grant using the Black-Scholes option-pricing model with the following range of assumptions:
 
 
Weighted average risk-free interest rate
 
1.47
-
2.63%
 
Expected dividend yield
 
0.41
-
0.50%
 
Expected stock volatility
 
10.07
-
11.90%
 
Expected life in years
 
2.5
-
6.5
 
Per share fair value of options issued during period  
$1.49
-
$3.35
 
 
 
The Company used the guidance in Staff Accounting Bulletin
No.
107
to determine the estimated life of options issued. Expected volatility is based on volatility of similar companies’ common stock. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The dividend yield is based on the Company’s history and expectation of dividend payouts.                                                                                           
 
As of
May 20, 2015,
no
further grants will be made under the
2007
Stock Option Plan (the
“2007
Plan”). Unexercised stock options that were granted under the
2007
Plan will remain outstanding and will expire under the terms of the individual stock grant. A summary of the activity in the Company’s
2007
Stock Option Plan is as follows:
 
   
 
 
 
 
 
 
 
 
Weighted-
   
 
 
 
   
 
 
 
 
Weighted-
   
Average
   
 
 
 
   
 
 
 
 
Average
   
Remaining
   
Aggregate
 
   
Number of
   
Exercise
   
Contractual
   
Intrinsic
 
   
Options
   
Price
   
Term
   
Value
 
Outstanding at December 31, 2016
   
42,200
    $
10.16
     
 
     
 
 
Options exercised
   
(2,600
)    
10.00
     
 
     
 
 
Options forfeited
   
(200
)    
10.00
     
 
     
 
 
Outstanding at September 30, 2017
   
39,400
    $
10.17
     
 
     
 
 
Options exercised
   
(16,850
)   $
10.00
     
 
     
 
 
Options forfeited
   
(350
)   $
10.00
     
 
     
 
 
Outstanding at December 31, 2017
   
22,200
    $
10.31
     
 
     
 
 
Options exercised
   
(7,500
)    
10.00
     
 
     
 
 
Outstanding at September 30, 2018 (in years)
   
14,700
    $
10.46
     
1.20
    $
161,000
 
Exercisable at September 30, 2018 (in years)
   
14,700
    $
10.46
     
1.20
    $
161,000
 
 
At
September 30, 2018,
there was
no
unrecognized compensation expense related to nonvested share-based compensation arrangements granted under the
2007
plan.
 
In
2012,
the Company’s Board of Directors and shareholders adopted the Directors’ Plan. The Directors’ Plan permits the Company’s and the Bank’s directors to elect to receive any compensation to be paid to them in shares of the Company’s common stock. Pursuant to the Directors’ Plan, each director is permitted to make an election to receive shares of stock instead of cash. To encourage directors to elect to receive stock, the Directors’ Plan provides that if a director elects to receive stock, he or she will receive in common stock
110%
of the amount of cash fees set by the Board or the Compensation and Nominating Committee. The value of stock to be awarded pursuant to the Directors’ Plan will be the closing price of a share of common stock as traded on the Over-the Counter Bulletin Board, or a price set by the Board or its Compensation and Nominating Committee, acting in good faith, but in
no
case less than fair market value. The maximum number of shares to be issued pursuant to the Directors’ Plan is limited to
74,805
shares. For the
nine
months ended
September 30, 2018
and
2017,
our directors received
2,194
and
3,104
shares of common stock, respectively, in lieu of cash fees calculated at
110%
to be
$46,000
and
$51,000,
respectively. At
September 30, 2018,
55,908
shares remained available for grant.