STOCK COMPENSATION PLAN

12 Months Ended

Dec. 31, 2020

Compensation Related Costs [Abstract]

STOCK COMPENSATION PLAN

NOTE 6 – STOCK COMPENSATION PLAN

On June 13, 2013, the shareholders approved and ratified the Company’s 2013 Stock Option and Stock Award Plan (the “2013 Plan”) authorizing the grant of stock options or restricted stock awards to directors, officers and key employees of options to purchase up to 3 million shares of common stock. The 2013 Plan replaced the Company’s 2003 Stock Option Plan (the “2003 Plan”), which, pursuant to its terms, terminated in 2013. The outstanding options under the 2003 Stock Option and Award Plan, as amended, remain outstanding until exercised, forfeited or expired.

On June 14, 2018, the shareholders approved and ratified an amendment and restatement (and renaming) of the Company’s Amended and Restated 2013 Incentive Award Plan (formerly 2013 Stock Option and Stock Award Plan). The amendment and restatement made two substantive changes: (1) provide an additional 2 million common shares for future grant of option awards, restricted stock awards, or other stock-based awards; and (2) allow for the issuance of other stock-based awards.

The Compensation Committee has the exclusive authority to administer and construe the 2013 Plan and shall determine, among other things: persons eligible for awards and who shall receive them; the terms and conditions of the awards; the time or times and conditions subject to which awards may become vested, deliverable, exercisable, or as to which any may apply, be accelerated or lapse; and amend or modify the terms and conditions of an award with the consent of the participant.

Generally, the term of any stock option may not be more than 10 years from the date of grant. The option price may not be below the fair market value at date of grant. If and to the extent that an award made under the 2013 Plan is forfeited, terminated, expires or is canceled unexercised, the number of shares associated with the forfeited, terminated, expired or canceled portion of the award shall again become available for additional awards under the 2013 Plan.

The Company accounts for stock options and restricted stock in accordance with ASC 718-10, Compensation-Stock Compensation. ASC 718-10 requires that compensation cost for all stock awards be calculated and amortized over the service period (generally equal to the vesting period).

Stock Options

During the year ended December 31, 2020, forty one employees were granted options to purchase a total of 715,000 shares. During the year ended December 31, 2019, forty one employees were granted options to purchase a total of 644,000 shares. During the year ended December 31, 2018, forty employees were granted options to purchase a total of 605,000 shares. The fair value of these options for the years ended December 31, 2020, 2019 and 2018 was approximately $686,000, $1.1 million and $1.2 million, respectively, based on assumptions noted below and is being amortized over the vesting period. The remaining unamortized stock option expense was $500,000 as of December 31, 2020, which will be expensed ratably through 2025.

The Company calculates the fair value of each option grant on the grant date using the Black-Scholes option-pricing model which requires the Company to provide certain inputs, as follows:

● The assumed dividend yield is based on the Company’s expectation of an annual dividend rate for regular dividends over the estimated life of the option.

● Expected volatility is based on the historical volatility of the Company’s stock over a period relevant to the related stock option grant.

● The risk-free interest rate utilized is the interest rate on U.S. Government Bonds and Notes having the same life as the estimated life of the Company’s option awards.

● Expected life of the options granted is estimated based on historical data reflecting actual hold periods.

● Estimated forfeiture is based on historical data reflecting actual forfeitures.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in the following years:

	2020			2019			2018
Dividend yield		5.33	%		5.13	%		4.79	%
Expected volatility		24.57	%		24.04	%		25.78	%
Risk-free interest rate		0.89	%		2.50	%		2.74	%
Expected lives		10			10			10
Estimated forfeitures		0			0			0

During the year ended December 31, 2020, options to ten employees to purchase a total of 62,500 shares were exercised. During the year ended December 31, 2019, options to sixteen employees to purchase a total of 240,000 shares were exercised. During the year ended December 31, 2018, options to eight employees to purchase a total of 129,000 shares were exercised. During the year ended December 31, 2020, options to two employees to purchase a total of 23,000 shares were forfeited or expired. During the year ended December 31, 2019, options to one employee to purchase a total of 20,000 shares were forfeited. During the year ended December 31, 2018, options to one employee to purchase a total of 2,000 shares were forfeited.

A summary of the status of the Company’s stock option plans as of December 31, 2020, 2019 and 2018 and changes during the years then ended are as follows (in thousands):

	2020					2019					2018
				Weighted-					Weighted-					Weighted-
				Average					Average					Average
				Exercise					Exercise					Exercise
	Shares			Price		Shares			Price		Shares			Price
Outstanding at beginning of year		2,637		$	12.05		2,253		$	12.09		1,778		$	11.60
Granted		715			9.84		644			13.67		605			13.26
Exercised		(63	)		10.55		(240	)		10.84		(129	)		10.78
Forfeited		(11	)		11.65		(20	)		13.50		(1	)		12.41
Expired		(12	)		11.29		0			0		0			0
Outstanding at end of year		3,266			12.03		2,637			12.05		2,253			12.09
Options exercisable at end of year		2,556					1,196					1,648
Weighted average fair value of options granted during the year				$	0.96				$	1.72				$	2.05

The following is a summary of stock options outstanding as of December 31, 2020 (in thousands):

Date of Grant	Number of Employees		Number of Shares			Option Price		Expiration Date
06/26/13		7		148			10.08	06/26/21
06/11/14		7		142			9.85	06/11/22
06/24/15		8		240			9.82	06/24/23
04/05/16		12		297			9.77	04/05/24
01/19/17		2		60			14.25	01/19/27
04/04/17		31		504			15.04	04/04/27
04/02/18		31		470			13.09	04/02/28
07/09/18		4		40			15.75	07/09/28
12/10/18		1		25			12.94	12/10/28
01/02/19		2		60			11.42	01/02/29
04/02/19		36		570			13.90	04/02/29
01/17/20		1		10	*		16.37	01/17/30
03/25/20		39		685	*		9.70	03/25/30
05/20/20		2		15	*		11.80	05/20/30
				3,266

* Unexercisable

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock for the options that were in-the-money. The aggregate intrinsic value of options outstanding as of December 31, 2020, 2019 and 2018 was $9.3 million, $8.3 million and $2.0 million, respectively, of which $5.7 million, $6.9 million and $2.0 million relate to options exercisable. The intrinsic value of options exercised in 2020, 2019 and 2018 was $283,000, $914,000 and $510,000, respectively, determined as of the date of option exercise. The weighted average remaining contractual term of the above options was 9.9, 9.1 and 7.9 years as of December 31, 2020, 2019 and 2018, respectively. For the years ended December 31, 2020, 2019 and 2018, amounts charged to stock compensation expense relating to stock option grants, which is included in General and Administrative Expenses, totaled $396,000, $1.2 million and $1.1 million, respectively.

Restricted Stock

On January 8, 2020, the Company awarded a total of 15,000 shares of restricted stock to three employees. On October 23, 2020, the Company awarded a total of 19,700 shares of restricted stock to two participants, pursuant to their employment agreements. On April 2, 2019, the Company awarded a total of 118,000 shares of restricted stock to two participants, pursuant to their employment agreements. On April 2, 2018, the Company awarded a total of 45,000 shares of restricted stock to two participants, pursuant to their employment agreements. During 2018, the Company also awarded 2,000 shares of restricted stock to our ten directors as additional directors’ fees. The grant date fair value of restricted stock grants awarded to participants was $512,000, $1.6 million and $616,000 for the years ended December 31, 2020, 2019 and 2018, respectively. These grants primarily vest in equal installments over five years. As of December 31, 2020, there remained a total of $2.0 million of unrecognized restricted stock compensation related to outstanding non-vested restricted stock grants awarded and outstanding at that date. Restricted stock compensation is expected to be expensed over a remaining weighted average period of 3.5 years. For the years ended December 31, 2020, 2019 and 2018, amounts charged to stock compensation expense related to restricted stock grants, which is included in General and Administrative Expenses, totaled $931,000, $723,000 and $498,000, respectively.

A summary of the status of the Company’s non-vested restricted stock awards as of December 31, 2020, 2019 and 2018, and changes during the year ended December 31, 2020, 2019 and 2018 are presented below (in thousands):

	2020					2019					2018
				Weighted-					Weighted-					Weighted-
				Average					Average					Average
				Grant Date					Grant Date					Grant Date
	Shares			Fair Value		Shares			Fair Value		Shares			Fair Value
Non-vested at beginning of year		238		$	13.33		161		$	12.44		147		$	11.98
Granted		35			14.75		118			11.12		47			13.11
Dividend Reinvested Shares		11			12.91		11			13.51		8			13.37
Vested		(72	)		12.87		(52	)		5.69		(41	)		11.76
Non-vested at end of year		212		$	13.69		238		$	13.33		161		$	12.44

Other Stock-Based Awards

Effective June 20, 2018, a portion of our quarterly directors’ fee was paid with our unrestricted common stock. During 2020, 11,000 unrestricted shares of common stock were granted with a weighted average fair value on the grant date of $16.13 per share. During 2019, 4,000 unrestricted shares of common stock were granted with a weighted average fair value on the grant date of $13.52 per share. During 2018, 2,000 unrestricted shares of common stock were granted with a weighted average fair value on the grant date of $15.13 per share.

As of December 31, 2020, there were 458,000 shares available for grant as stock options, restricted stock or other stock-based awards under the 2013 Plan.