Page 42 - Annual Report 2017

TEXAS GULF BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements
December 31, 2016 and 2015

NOTE N STOCK OPTION PLANS (CONTINUED)

A summary of changes in unvested options for the periods ended December 31, 2016 and
2015 is as follows:

2016 2015

Number Weighted Number Weighted
of Average of Average
Shares Underlying Grant Date Shares Underlying Grant Date
Options Fair Value Options Fair Value
Unvested outstanding,
beginning of year 11,577 $ 24.10 15,691 $ 21.92
Granted - $ - 2,000 $ 32.03
Vested (3,923) $ 25.93 (6,114) $ 16.73

Unvested outstanding,
end of year 7,654 $ 23.20 11,577 $ 24.10

The fair value of each option grant is estimated on the date of grant using the Black-
Scholes option pricing model. There were no options granted in 2016. For options granted
in 2015, the following assumptions were used:

2015
Dividend Yield 0%
Expected Volatility 10%
Risk Free Interest Rate 1.77%
Expected Life in Years 10

For options granted on or after January 1, 2006, compensation costs are recognized in the
consolidated statements of earnings based on their fair values on the date of the grant. For the
years ended December 31, 2016 and 2015, compensation expense of $100,392 and $130,091
respectively, was recorded. As of December 31, 2016, there was approximately $177,552 of
total unrecognized compensation expense related to the stock-based compensation
arrangements. That cost is expected to be recognized in the Company’s consolidated
statements of income over a period of four years.

NOTE O RETIREMENT BENEFITS

The Company has a contributory employee savings plan covering substantially all employees.
Participants in the plan may contribute up to the maximum allowed by the Internal Revenue
Service. The Company matches 50% of participants’ deductions up to 4% of their salary. At
the discretion of the Board of Directors, the Company may contribute an additional
percentage of each participant’s salary to the plan. Total Company contributions to the plan,
including the discretionary profit sharing portion, were approximately $380,000 and $334,000
for the years ended December 31, 2016 and 2015, respectively. These amounts are included
in salaries and employee benefits for each of the respective periods.

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