Stock Based Compensation

12 Months Ended

Dec. 31, 2018

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

Stock Based Compensation

Note 19 - Stock Based Compensation

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 December 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 December 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, options and restricted stock units 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 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, performance units and restricted stock 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. Stock-based compensation expense for the year ended December 31, 2018, December 31, 2017 and December 31, 2016 was $1.9 million, $1.8 million and $2.1 million, respectively.

Activity under the Company’s options as of and for the year ended December 31, 2018 was as follows: 

	Number of Stock Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding at December 31, 2017		299,778	$	6.18
Granted		-
Exercised		(189,992)		4.89
Forfeited/cancelled/expired		(1,323)		14.24
Outstanding at December 31, 2018		108,463		8.35		2.8	$	1,097,806
Exercisable at December 31, 2018		108,463	$	8.35		2.8	$	1,097,806

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 December 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 December 31, 2018. This amount changes based on the fair market value of the Company’s stock.

Activity under the Company’s restricted shares for the year ended December 31, 2018 was as follows: 

	Nonvested Shares		Weighted- Average Grant Date Fair Value
Nonvested at December 31, 2017		103,078	$	20.41
Granted		24,684		27.86
Vested		(58,668)		18.89
Forfeited/cancelled/expired		(666)		24.25
Nonvested at December 31, 2018		68,428		23.04

As of December 31, 2018, there was approximately $687,000 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 0.8 years. A total of 24,684 restricted shares were granted during the year ended December 31, 2018.

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

	Units (expected)		Units (maximum)		Weighted Average Grant Date Fair Value
Unearned at December 31, 2017		151,194			$	19.19
Awarded		19,614				31.35
Change in Estimate		(15,172)
Vested		(69,627)				19.46
Unearned at December 31, 2018		86,009		151,772	$	22.06

At December 31, 2018, the specific number of shares related to performance units that were expected to vest was 86,009, 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 December 31, 2018 the maximum amount of performance units that ultimately could vest if performance targets were exceeded is 151,772.

At December 31, 2018, compensation cost of approximately $653,000 related to non-vested performance units not yet recognized is expected to be recognized over a weighted-average period of 1.5 years. A total of 19,614 performance units were awarded during the year ended December 31, 2018, respectively.

During the year ended December 31, 2018, 69,627 vested and 42,672 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.

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

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

At December 31, 2018, the specific number of shares related to restricted stock units 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.

At December 31, 2018, compensation cost of approximately $679,000 related to non-vested restricted stock units, not yet recognized, is expected to be recognized over a weighted-average period of 2.0 years. A total of 29,423 restricted stock units were awarded during the year ended December 31, 2018.

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 expense for the year ended December 31, 2018 and December 31, 2017 is a benefit of approximately $1.1 million and $0.5 million, respectively, which resulted from the effect of implementing ASU 2016-09.