STOCK BASED COMPENSATION

12 Months Ended

Dec. 31, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE 18—STOCK BASED COMPENSATION

Stock Option Plans

The Company maintains three stock-based compensation plans from which new grants could be issued. The Company’s stock-based compensation plans permit Parent Corporation common stock to be issued to key employees and directors of the Company and its subsidiaries. The options granted under the plans are intended to be either incentive stock options or non-qualified options. Under the 2009 Equity Incentive Plan, a total of 363,081 shares are available for grant and issuance as of December 31, 2014. Under the 2003 Non-Employee Director Stock Option Plan, a total of 380,644 shares remain available for grant and issuance under the plan as of December 31, 2014. In addition, a total of 237,621 shares are available for grant and issuance under Legacy ConnectOne equity plan. Options may be exercised with shares issued from Treasury shares, newly issued shares or a combination of both.

Options have been granted to purchase common stock principally at the fair market value of the stock at the date of grant. Options are exercisable over a three-year vesting period starting one year after the date of grant and generally expire ten years from the date of grant.

The total compensation expense related to these plans was $58,000, $59,000 and $39,000 for the years ended December 31, 2014, 2013 and 2012, respectively.

Under the principal option plans, the Company may grant restricted stock awards to certain employees. Restricted stock awards are non-vested stock awards. Restricted stock awards are independent of option grants and are generally subject to forfeiture if employment terminates prior to the release of the restrictions. Such awards generally vest during a period specified at the date of grant. During that period, ownership of the shares cannot be transferred. Restricted stock has the same cash dividend and voting rights as other common stock and is considered to be currently issued and outstanding. The Company expenses the cost of the restricted stock awards, which is determined to be the fair market value of the shares at the date of grant, ratably over the period during which the restrictions lapse. During 2014, 0 restricted shares were awarded. During 2013, 18,829 shares were awarded while in 2012, 2,125 shares were awarded. 2013 shares were issued from treasury stock, while 2012 shares were purchased in the open market. The amount of compensation cost related to restricted stock awards included in salary expense was $165,000, $24,000 and $25,000 in 2014, 2013 and 2012, respectively.

Options covering 41,639 shares were granted on August 27 and March 1, 2013, while 27,784 were granted on March 1, 2012. 0 options were issued during 2014. The fair value of stock option payment awards was estimated using the Black-Scholes option pricing model with the following assumptions and weighted average fair values:

	2014				2013				2012
Weighted average fair value of grants		$	—			$	2.50 – 5.87			$	2.03
Risk-free interest rate			—	%			1.86 – 2.29	%			2.03	%
Dividend yield			—	%			1.76 – 2.11	%			1.24	%
Expected volatility			—	%			23.21 – 33.74	%			22.04	%
Expected life in months							69 – 90				68

Option activity under the principal option plans as of December 31, 2014 and changes during the twelve months ended December 31, 2014 were as follows:

	Shares			Weighted- Average Exercise Price			Weighted- Average Remaining Contractual Term (In Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2013		188,380			$	10.55
Granted		—				—
Assumed In Merger		795,188				4.73
Exercised		(100,911	)			8.77
Forfeited/cancelled/expired		—				—
Outstanding at December 31, 2014		882,657			$	5.65		4.38		$	11,784,579
Exercisable at December 31, 2014		882,657			$	5.65		4.38		$	11,784,579

Information related to the stock option plan during 2014:

	2014
Intrinsic value of options exercised		$	1,011,000
Cash received from options exercised			885,000
Tax benefit realized from options exercised			282,000
Weighted average fair value of options granted			—

The aggregate intrinsic value of options above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of 2014 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2014. This amount changes based on the fair market value of the Parent Corporation’s stock.

In conjunction with the plans above, the Company granted restricted shares to certain executive officers. Compensation expense is recognized over the vesting period of the awards based on the fair value of the stock at issue date. The fair value of the stock granted prior to the Legacy ConnectOne IPO was based on the book value of stock on the date of the grant. The fair value of the stock granted after the Legacy ConnectOne IPO was based on the closing market price of its common stock as of the grant date. Generally, grants of restricted shares vest one-third, each, on the first, second and third anniversaries of the grant date.

	Nonvested Shares			Weighted- Average Grant Date Fair Value
Nonvested at December 31, 2013		18,829			$	18.76
Assumed in Merger		52,468				11.65
Granted		—				—
Vested		(20,994	)			17.62
Forfeited/cancelled/expired		—				—
Outstanding at December 31, 2014		50,303			$	11.79

As of December 31, 2014, there was $475,000 of total unrecognized compensation cost related to nonvested shares granted under the plans. The cost is expected to be recognized over a weighted average period of 18.1 months. The total fair value of shares vested during year ended December 31, 2014 and 2013, was $374,000 and 0, respectively. There were 0 material expenses related to vesting of restricted stock expense in 2014, 2013 and 2012.