7. Shareholders’ Equity


	Twelve-month Period Ended December 31, 2019
			Accumulated
			Other				Capital in						Total
	Retained		Comprehensive		Common		excess of				Treasury		shareholders'
	Earnings		Income		Stock		par value		ESOT		stock		equity

January 1, 2019	$	18,788	$	35	$	523	$	14,250	$	(561)	$	(1,522)	$	31,513

Purchase of treasury shares		—		—		—		—		—		(128)		(128)
Stock based compensation		—		—		—		14		—		44		58
Net Income		98		—		—		—		—		—		98
March 31, 2019	$	18,886	$	35	$	523	$	14,264	$	(561)	$	(1,606)	$	31,541

Dividends declared ($0.16 per share)		(413)		—		—		—		—		—		(413)
Purchase of treasury shares		—		—		—		—		—		(21)		(21)
Stock based compensation		—		—		—		34		—		61		95
Net Income		714		—		—		—		—		—		714
June 30, 2019	$	19,187	$	35	$	523	$	14,298	$	(561)	$	(1,566)	$	31,916

Purchase of treasury shares		—		—		—		—		—		(8)		(8)
Stock based compensation		—		—		—		28		—		58		86
Net Income		1,132		—		—		—		—		—		1,132
September 30, 2019	$	20,319	$	35	$	523	$	14,326	$	(561)	$	(1,516)	$	33,126

Retirement benefits adjustment		—		63		—		—		101		—		164
Stock based compensation		—		—		—		32		—		45		77
Net Income		165		—		—		—		—		—		165
December 31, 2019	$	20,484	$	98	$	523	$	14,358	$	(460)	$	(1,471)	$	33,532


	Twelve-month Period Ended December 31, 2018
			Accumulated
			Other				Capital in						Total
	Retained		Comprehensive		Common		excess of				Treasury		shareholders'
	Earnings		Income		Stock		par value		ESOT		stock		equity

January 1, 2018	$	15,709	$	(32)	$	523	$	14,171	$	(662)	$	(1,544)	$	28,165

Purchase of treasury shares		—		—		—		—		—		(117)		(117)
Net Income		331		—		—		—		—		—		331
March 31, 2018	$	16,040	$	(32)	$	523	$	14,171	$	(662)	$	(1,661)	$	28,379

Dividends declared ($0.16 per share)		(416)		—		—		—		—		—		(416)
Purchase of treasury shares		—		—		—		—		—		(33)		(33)
Stock based compensation		(6)		6		—		21		—		64		85
Net Income		707		—		—		—		—		—		707
June 30, 2018	$	16,325	$	(26)	$	523	$	14,192	$	(662)	$	(1,630)	$	28,722

Dividends declared ($0.16 per share)		3		—		—		—		—		—		3
Stock based compensation		—		—		—		34		—		64		98
Net Income		1,457		—		—		—		—		—		1,457
September 30, 2018	$	17,785	$	(26)	$	523	$	14,226	$	(662)	$	(1,566)	$	30,280

Compensation Expense		—		—		—		—		101		—		101
Retirement benefits adjustment		—		67		—		—		—		—		67
Purchase of treasury shares		—		—		—		—		—		(25)		(25)
Stock based compensation		—		(6)		—		24		—		69		87
Net Income		1,003		—		—		—		—		—		1,003
December 31, 2018	$	18,788	$	35	$	523	$	14,250	$	(561)	$	(1,522)	$	31,513

The Company’s Board of Directors authorized the purchase of up to 450,000 shares of its common stock in the open market or in privately negotiated transactions. As of December 31, 2019, the Company has purchased 360,255 shares and there remain 89,745 shares available to purchase under this program. There were 5,232 shares purchased by the Company in 2019.

On January 1, 2019, 26,250 shares of restricted stock vested of which 9,729 shares were withheld by the Company for approximately $99,000 to satisfy statutory minimum withholding tax requirements for those participants who elected this option as permitted under the Company’s 2012 Long-Term Incentive Plan.

On May 25, 2018, the Company issued 78,750 shares of restricted stock to Executive Officers and certain key management of the Company under the Company’s 2012 Long-Term Incentive Plan. The restricted share awards have varying vesting periods between January 2019 and January 2021; however, these shares have voting rights and accrue dividends prior to vesting. The accrued dividends are paid upon vesting of the restricted shares. The aggregate amount of expense to the Company, measured based on grant date fair value is expected to be approximately $735,000 and will be recognized over the requisite service period.

The Company's director compensation policy provides that non-employee directors receive a portion of their annual retainer in the form of restricted stock under the Company’s 2012 Long-Term Incentive Plan. These shares vest quarterly over a twelve month service period, have voting rights and accrue dividends that are paid upon vesting. The aggregate amount of expense to the Company, measured based on the grant date fair value, will be recognized over the requisite service period. An aggregate of 4,288 restricted shares were issued on May 25, 2018 with a grant date fair value of $40,000. An aggregate of 7,836 restricted shares were issued on April 26, 2019 with a grant date fair value of $100,000.

Included in the year ended December 31, 2019 and 2018 is approximately $316,000 and $276,000, respectively, of stock-based compensation expense related to the restrictive share awards. We have approximately $286,000 in unvested shares to be recognized in 2020.

On May 15, 2019 the Company announced that its Board of Directors declared a $0.16 per share cash dividend. The dividend was subsequently paid on July 15, 2019 to shareholders of record on June 28, 2019 and was approximately $413,000 in the aggregate. These dividends do not represent that the Company will pay dividends on a regular or scheduled basis. The amount is recorded in dividends payable and as a reduction to retained earnings on the accompanying consolidated balance sheet.

Earnings Per Share

Basic earnings per share is computed by dividing net income by the weighted average number of shares outstanding during the period. The weighted average number of common shares outstanding does not include any potentially dilutive securities or any unvested restricted shares of common stock. These unvested restricted shares, although classified as issued and outstanding, are considered forfeitable until the restrictions lapse and will not be included in the basic EPS calculation until the shares are vested. Diluted earnings per share is computed by dividing net income by the weighted average number of shares outstanding during the period plus the number of shares of common stock that would be issued assuming all contingently issuable shares having a dilutive effect on the earnings per share that were outstanding for the period. The dilutive effect of unvested restrictive stock is determined using the treasury stock method.


	December 31,		December 31,
	2019		2018
	($000's omitted except for per share data)

Net Income	$	2,109	$	3,498
Weighted average common shares outstanding (basic)		2,330		2,272
Unvested restricted stock		56		81
Weighted average common shares outstanding (diluted)		2,386		2,353
Basic
Net income per share	$	0.91	$	1.54
Diluted
Net income per share	$	0.88	$	1.49

Share Based Payments

The Company’s 2012 Long-Term Incentive Plan was approved by the shareholders at the 2012 Annual Meeting of Shareholders. This plan authorizes the issuance of up to 300,000 shares. As of December 31, 2019, there is no unrecognized compensation related to the unvested restricted shares vested on January 1, 2020.

A summary of the status of restricted share awards granted under all employee plans is presented below:


		Weighted Average Grant Date
	Shares	Fair Value

Restricted Share Activity:
Unvested at December 31, 2017	28,500	$	7.96

Granted in 2018	83,038		9.33
Vested in 2018	30,644	$	8.06
Unvested at December 31, 2018	80,894	$	9.33

Granted in 2019	7,836	$	12.77
Forfeited in 2019	2,000	$	9.33
Vested in 2019	32,314	$	9.75
Unvested at December 31, 2019	54,416	$	9.58

Shareholders’ Rights Plan

During 2012, the Company’s Board of Directors adopted a shareholders’ rights plan (the “Rights Plan”) and simultaneously declared a dividend distribution of one right for each outstanding share of the Company’s common stock outstanding at October 15, 2012. The Rights Plan replaced a previous shareholders rights plan that was adopted in 2002 and expired on August 28, 2012. The rights do not become exercisable until the earlier of (i) the date of the Company’s public announcement that a person or affiliated group other than Dr. Nicholas D. Trbovich, Kenneth D. Trbovich or the ESOP trust (an “Acquiring Person”) has acquired, or obtained the right to acquire, beneficial ownership of 25% or more of the Company’s common stock (excluding shares held by the ESOP trust) or (ii) ten business days following the commencement of a tender offer that would result in a person or affiliated group becoming an Acquiring Person.

The exercise price of a right has been established at $32.00. Once exercisable, each right would entitle the holder to purchase one one-hundredth of a share of Series A Junior Participating Preferred Stock. In the event that any person becomes an Acquiring Person, each right would entitle any holder other than the Acquiring Person to purchase common stock or other securities of the Company having a value equal to three times the exercise price. The Board of Directors has the discretion in such event to exchange two shares of common stock or two one-hundredths of a share of preferred stock for each right held by any holder other than the Acquiring Person.