Note 13 - Stock Based Compensation

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

Note 13 – Stock Based Compensation 

The Company's 2018 Equity Compensation Plan (the "2018 Plan") was adopted by the Board of Directors of the Company on February 20, 2018, and approved by shareholders on May 15, 2018, at the Company's 2018 Annual Meeting of Shareholders. The 2018 Plan provides for the granting of restricted stock awards, incentive and non-statutory options, and other equity-based awards to employees and directors at the discretion of the Compensation Committee of the Board of Directors.  The 2018 Plan authorizes the issuance of up to 675,000 shares of common stock. The 2018 Plan replaced the Company's stock incentive plan that was approved by the shareholders at the 2008 Annual Meeting that expired in February 2018 (the "2008 Plan").

Stock Options

Accounting guidance requires that compensation cost relating to share-based payment transactions be recognized in the financial statements with measurement based upon the fair value of the equity or liability instruments issued.

A summary of stock option transactions for the six months ended June 30, 2020 is as follows:

	Option Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value ($000)
Outstanding at December 31, 2019		13,944		$	16.63
Granted		—			—
Exercised		(1,793	)		16.63
Forfeited		—			—
Expired		—			—
Outstanding and exercisable at June 30, 2020		12,151		$	16.63		4.47	$	102

The fair value of options is estimated at the date of grant using the Black-Scholes option pricing model and expensed over the options' vesting period. No stock options have been granted since 2009. Replacement stock option awards representing 40,753 shares of the Company's common stock were issued in conjunction with the HomeTown acquisition in 2019.  As of June 30, 2020, there were no nonvested stock option grants and no unrecognized compensation expense.  The outstanding options have a remaining final maturity date of December 2024.

Restricted Stock

The Company from time to time grants shares of restricted stock to key employees and non-employee directors. These awards help align the interests of these employees and directors with the interests of the shareholders of the Company by providing economic value directly related to increases in the value of the Company's common stock. The value of the stock awarded is established as the fair value of the Company's common stock at the time of the grant. The Company recognizes expense, equal to the total value of such awards, ratably over the vesting period of the stock grants. The majority of the restricted stock granted cliff vests at the end of a 36-month period beginning on the date of the grant. The remainder vests one-third each year beginning on the date of the grant. Nonvested restricted stock activity for the six months ended June 30, 2020 is summarized in the following table.

Restricted Stock	Shares			Weighted Average Grant Date Value Per Share
Nonvested at December 31, 2019		57,271		$	34.84
Granted		19,327			37.26
Vested		(18,580	)		34.46
Forfeited		(1,518	)		32.25
Nonvested at June 30, 2020		56,500		$	35.86

As of June 30, 2020 and December 31, 2019, there was $1,002,000 and $751,000 respectively, in unrecognized compensation cost related to nonvested restricted stock granted under the 2008 Plan and the 2018 Plan. The weighted average period over which this cost is expected to be recognized is 1.58 years. The share based compensation expense for nonvested restricted stock was $409,000 and $585,000 during the first six months of 2020 and 2019, respectively.

The Company offers its outside directors alternatives with respect to director compensation. For 2020, the regular quarterly board retainer will be received in the form of shares of immediately vested, but restricted stock with a market value of $10,000. Monthly meeting fees can be received as $800 per meeting in cash or $1,000 in immediately vested, but restricted stock. Only outside directors receive board fees. The Company issued 13,704 and 8,793 shares and recognized share based compensation expense of $412,000 and $318,000 during the first six months of 2020 and 2019, respectively.