The Company’s stockholders approved the 2017 Equity Compensation Plan (“the Plan”) on May 23, 2017. The Plan eliminates all remaining issuable shares under previous plans and is the only outstanding plan as of March 31, 2018. The maximum number of shares of common stock or equivalents, which may be issued under the Plan, is 750,000. Grants under the Plan can be in the form of stock options (qualified or non-qualified), restricted shares, restricted share units or performance units. Shares available for grant and issuance under the Plan as of March 31, 2018 are approximately 668,000. The Company intends to issue all shares under the Plan in the form of newly issued shares.

Restricted stock and option awards typically have a three-year vesting period starting one year after the date of grant with one-third vesting each year. The options generally expire ten years from the date of grant. Restricted stock awards granted to new employees and board members may be granted with shorter vesting periods. Grants of performance units typically have a cliff vesting after three years or upon a change of control. All issuances are subject to forfeiture if the recipient leaves or is terminated prior to the awards vesting. Restricted shares have the same dividend and voting rights as common stock, while options and performance units do not.

All awards are issued at fair value of the underlying shares at the grant date. The Company expenses the cost of the awards, which is determined to be the fair market value of the awards at the date of grant, ratably over the vesting period. Forfeiture rates are not estimated but are handled on a case-by-case basis.

Activity under the Company’s option plans as of and for the three months ended March 31, 2018 was as follows:

The aggregate intrinsic value of outstanding and exercisable options above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on March 31, 2018 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 March 31, 2018. This amount changes based on the fair market value of the Parent Corporation’s stock.

The below table represents information regarding restricted shares currently outstanding at March 31, 2018:

			Weighted-
			Average
	Nonvested		Grant Date
	Shares		Fair Value
Nonvested at December 31, 2017	103,078		$	20.41
Granted	22,004			28.00
Vested	(57,668	)		20.40
Forfeited/cancelled/expired	-			-
Nonvested at March 31, 2018	67,414		$	22.70

As of March 31, 2018, there was approximately $1,430,000 of total unrecognized compensation cost related to nonvested restricted shares granted under the plans. The cost is expected to be recognized over a weighted average period of 1.25 years. A total of 23,282 and 56,164 restricted shares were granted during the three months ended March 31, 2018 and March 31, 2017, respectively.

At March 31, 2018, the specific number of shares related to performance unit awards that were expected to vest was approximately 151,000, 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. At March 31, 2018 the maximum amount of performance units that ultimately could vest if performance targets were exceeded is approximately 227,000.

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

				Weighted
				Average Grant
	Units		Units	Date Fair
	(expected)		(maximum)	Value
Unearned at December 31, 2017	151,194		226,791	$	19.19
Awarded	19,614		29,421		31.35
Forfeited	-		-		-
Vested	(69,627	)	-		19.46
Unearned at March 31, 2018	101,181		151,771	$	21.11

At March 31, 2018, compensation cost of approximately $977,000 related to non-vested performance unit awards not yet recognized is expected to be recognized over a weighted-average period of 1.25 years. A total of 19,614 and 24,891 performance units were awarded during the three months ended March 31, 2018 and March 31, 2017, respectively. During the three months ended March 31, 2018, a total of 42,672 net shares were issued in satisfaction of earned performance units. The shares issued were calculated based on a net down of 26,955 shares to satisfy tax obligations created by vesting.

At March 31, 2018, the specific number of shares related to restricted stock unit awards that were expected to vest was approximately 29,423. Any forfeitures would result in previously recognized expense being reversed. A portion of the shares that vest will be repurchased to satisfy the tax obligations of the recipient.

A summary of the status of unearned restricted share units and the change during the period is presented in the table below:

		Weighted
		Average Grant
	Units	Date Fair
	(expected)	Value
Unearned at December 31, 2017	-	$	-
Awarded	29,423		31.35
Forfeited	-		-
Vested	-		-
Unearned at March 31, 2018	29,423	$	31.35

At March 31, 2018, compensation cost of approximately $910,000 related to non-vested restricted stock unit awards, not yet recognized, is expected to be recognized over a weighted-average period of 2.96 years. A total of 29,423 and -0- restricted stock units were awarded during the three months ended March 31, 2018 and 2017, respectively.

Effective January 1, 2017, the Company implemented ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment.” Under ASU 2016-09 all excess tax benefits and tax deficiencies related to share-based payment awards should be recognized as income tax expense or benefit in the income statement during the period in which they occur. Included in income tax expenses for the three months ended March 31, 2018 and March 31, 2017 is a benefit of approximately $541 thousand and $133 thousand, respectively, which resulted from the effect of implementing ASU 2016-09.