Stock Incentive Plan

At the Annual Meeting of Stockholders held April 26, 2017, the stockholders approved the 2017 Stock Incentive Plan ("SI Plan"). The SI Plan was implemented to succeed the Company's 2007 Stock Incentive Plan, which had a ten-year term. The SI Plan is intended to provide a means whereby directors, employees, consultants and advisors of the Company and its Subsidiaries may sustain a sense of proprietorship and personal involvement in the continued development and financial success of the Company and its Subsidiaries, thereby advancing the interests of the Company and its stockholders. Accordingly, directors and selected employees, consultants and advisors may be provided the opportunity to acquire shares of Common Stock of the Company on the terms and conditions established in the SI Plan.

A maximum of 149,983 shares are authorized under the SI Plan. Prior to December 31, 2008, the Company had awarded 59,500 shares as stock options under the 2007 SI Plan. There have been no options awarded since 2008. The Company awarded 18,391, 13,912 and 18,002 shares during 2017, 2016, 2015, respectively as stock and stock unit awards.

The fair value of options granted was estimated on the grant date using the Black-Scholes option-pricing model. Expected volatility was based on historical volatility of the Company’s stock and other factors. The Company used historical data to estimate option exercises and employee termination within the valuation model; separate groups of employees who had similar historical exercise behavior were considered separately for valuation purposes. The expected term of options granted was derived from the output of the option valuation model and represented the period of time that options granted were expected to be outstanding. The risk-free rate for periods within the contractual life of the option was based on the U.S. Treasury yield curve in effect at the time of the grant. There were no options granted during 2017, 2016 or 2015.

The following table summarizes the compensation cost, net of forfeitures, related to stock-based compensation for the years ended December 31, 2017, 2016 and 2015 (in thousands):



	2017			2016			2015
Stock and stock unit awards:
Pre-tax compensation expense	$	954		$	384		$	378
Income tax benefit	(334		)	(134		)	(132		)
Total share-based compensation expense, net of income taxes	$	620		$	250		$	246

A summary of option activity under the SI Plan and the 1997 Stock Incentive Plan as of December 31, 2017, 2016 and 2015, and changes during the years then ended is presented below:



	2017
	Shares	Weighted-Average Exercise Price	Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding, beginning of year	40,500	$24.65
Granted	0	0.00
Exercised	(27,500)	25.42
Forfeited or expired	(2,500)	23.00
Outstanding, end of year	10,500	$23.00	0.96	$	163,170
Exercisable, end of year	10,500	$23.00	0.96	$	163,170

The total intrinsic value of options exercised during 2017 was $259,000. There were no stock options for shares of common stock not considered in computing the aggregate intrinsic value of outstanding shares and exercisable shares for 2017 because they were anti-dilutive.



	2016
	Shares	Weighted-Average Exercise Price	Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding, beginning of year	45,500	$24.67
Granted	0	0.00
Exercised	(2,500)	24.86
Forfeited or expired	(2,500)	24.86
Outstanding, end of year	40,500	$24.65	1.42	$	378,850
Exercisable, end of year	40,500	$24.65	1.42	$	378,850

The total intrinsic value of options exercised during 2016 was $14,000. There were no stock options for shares of common stock not considered in computing the aggregate intrinsic value of outstanding shares and exercisable shares for 2016 because they were anti-dilutive.



	2015
	Shares	Weighted-Average Exercise Price	Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding, beginning of year	52,000	$24.64
Granted	0	0.00
Exercised	0	0.00
Forfeited or expired	(6,500)	24.43
Outstanding, end of year	45,500	$24.67	2.42	$	63,000
Exercisable, end of year	45,500	$24.67	2.42	$	63,000

There were no options exercised during 2015. Stock options for 24,500 shares of common stock were not considered in computing the aggregate intrinsic value of outstanding shares and exercisable shares for 2015 because they were anti-dilutive.

The following table summarizes information about stock options under the SI Plan outstanding at December 31, 2017:



		Options Outstanding		Options Exercisable
Range of Exercise Prices	Number Outstanding	Weighted-Average Remaining Contractual Life	Weighted-Average Exercise Price	Number Exercisable	Weighted-Average Exercise Price
$22.50 to $24.50	10,500	0.96	$23.00	10,500	$23.00

During 2017, the Board changed its award process and subsequently approved the acceleration of the vesting of all remaining outstanding restricted stock units. This resulted in total compensation expense for the year ended December 31, 2017 of approximately, $954,000. During 2015, the Board approved a revision to the LTIP, whereby all awards granted to participants were stock unit awards, cumulative with a three-year performance period and to be settled entirely in shares. All other provisions of the plan remained the same. The following table summarizes non-vested stock and stock unit activity for the years ended December 31, 2017, 2016 and 2015:



	2017			2016			2015
	Shares	Weighted-avg Grant-date Fair Value		Shares	Weighted-avg Grant-date Fair Value		Shares	Weighted-avg Grant-date Fair Value
Nonvested, beginning of year	32,338	$22.64		30,169	$20.87		26,897	$22.95
Granted	18,391	30.65		13,912	26.09		18,002	20.14
Vested	(50,729)	25.54		(11,743)	22.18		(14,730)	23.77
Forfeited	0	0.00		0	0.00		0	0.00
Nonvested, end of year	0	$0.00		32,338	$22.64		30,169	$20.87
Fair value of shares vested		$	260,483		$	260,483		$	350,075

The fair value of the awards is amortized to compensation expense over the vesting periods of the awards (four years for annual awards and three years for cumulative awards) and is based on the market price of the Company’s common stock at the date of grant multiplied by the number of shares granted that are expected to vest. As of December 31, 2017, 2016 and 2015, there was $0, $344,000, and $386,000, respectively, of total unrecognized compensation cost related to unvested stock and stock unit awards under the SI Plan.