Stock-Based Compensation

6 Months Ended

Jun. 30, 2015

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

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

Note 9. Stock-Based Compensation

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 303,615 shares are available for grant and issuance as of June 30, 2015. In addition, a total of 114,327 shares remain available for grant and issuance under Legacy ConnectOne equity plans. 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 at the fair market value of the stock at the date of grant. Options granted to date are exercisable after a three to five-year vesting period starting one year after the date of grant and generally expire ten years from the date of grant. Restricted shares granted to date have a vesting schedule ranging from 1-3 years.

Stock-based compensation expense for share-based payment awards is based on the grant date fair value estimated on the date of grant. The Company recognizes compensation costs for those shares expected to vest on a straight-line basis over the requisite service period of the award, which is generally the option vesting term of three years. The Company estimates the forfeiture rate based on its historical experience during the preceding seven fiscal years.

Under the principal stock-based compensation plans, the Company may also grant stock awards to certain employees. Stock awards are independent of option grants and are generally subject to forfeiture if employment terminates prior to the release of any applicable restrictions. During that period, ownership of the shares cannot be transferred. Restricted stock and stock awards that are fully vested at the time of grant have the same cash dividend and voting rights as other common stock and are considered to be currently issued and outstanding. The Company expenses the cost of 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 any restrictions lapse.

There were 97,544 and 50,203 restricted stock awards outstanding at June 30, 2015 and December 31, 2014, respectively. These awards were issued with an award price equal to the market price of the Company’s common stock on the award date and with a three year vesting period. Forfeiture provisions exist for personnel that separate employment before the vesting period expires.

There were 0 shares of common stock underlying options that were granted during the three and six months ended June 30, 2015 and 2014, respectively.

Options activity under the stock-based compensation plans as of June 30, 2015 and changes during the six months ended June 30, 2015 were as follows: 

	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2014		882,657		$	5.65
Exercised		(339,334	)	$	4.16
Canceled/expired		—
Forfeited		(4,731	)
Outstanding at June 30, 2015		538,592		$	6.51		3.67	$	8,087,713
Exercisable at June 30, 2015		533,794		$	6.45		3.64	$	8,052,735

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 the second quarter of 2015 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 June 30, 2015. This amount changes based on the fair value of the Company’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 was based on the closing market price of the Company’s common stock as of the grant date. Generally, grants of restricted shares to date 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, 2014		50,203		$	11.79
Granted		67,906			18.50
Vested		(20,565	)		10.76
Forfeited/cancelled/expired		—			—
Outstanding at June 30, 2015		97,544		$	16.62

As of June 30, 2015, there was approximately $33,500 of total unrecognized compensation expense relating to unvested stock options. As of June 30, 2015, there was approximately $1,341,000 of total unrecognized compensation expense relating to unvested restricted stock awards. These costs are expected to be recognized over a weighted average period of 1.8 years. 

On April 30, 2015, the Company granted to various key employees performance unit awards (which are classified as equity awards), with each unit entitling the holder to one share of the Company’s common stock contingent upon the Company meeting or exceeding certain return on asset targets over the course of a three-year period ending April 30, 2018. Under the agreement, and assuming the Company has met or exceeded the applicable targets, grants of performance unit awards will vest on the third anniversary of the grant date or on an earlier date in the event of a change in control, as defined in the grant agreement. At June 30, 2015, the specific number of shares related to performance unit awards that were expected to vest was 94,585, determined by actual performance in consideration of the established range of the performance targets, which is consistent with the level of expense currently being recognized over the vesting period. Should this expectation change, additional compensation expense could be recorded in future periods or previously recognized expense could be reversed. The maximum amount of performance unit awards is 113,502.

A summary of the status of unearned performance unit awards and the change during the period is presented in the table below:

	Shares		Weighted- Average Grant Date  Fair Value
Unearned at April 30, 2015		94,585	$	19.46
Awarded		—		—
Forfeited		—		—
Expired		—		—
Unearned at June 30, 2015		94,585	$	19.46

The Company recognized $102,000 in compensation related to the performance units for the quarter ended June 30, 2015. As of June 30, 2015, there was approximately $1,789,000 of unrecognized compensation expense related to unearned performance units. These costs are expected to be recognized over a period of 2.8 years.