NOTE 11 – STOCK-BASED COMPENSATION

On May 5, 2015, the Company’s shareholders approved the Macatawa Bank Corporation Stock Incentive Plan of 2015 (the 2015 Plan).  The 2015 Plan provides for grant of up to 1,500,000 shares of Macatawa common stock in the form of stock options or restricted stock awards to employees and directors. There were 1,108,519 shares under the “2015 Plan” available for future issuance as of December 31, 2020.  The Company issues new shares under the 2015 Plan from its authorized but unissued shares.

Option awards are granted with an exercise price equal to the market price at the date of grant.  Option awards have vesting periods ranging from one to three years and have ten year contractual terms.

The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model.  Expected volatilities are based on historical volatilities of the Company’s common stock.  The Company uses historical data to estimate option exercise and post-vesting termination behavior.  The expected term of options granted is based on historical data and represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable.  The Company expects that all options granted will vest and become exercisable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

There were no options granted during 2020 and 2019.  Additionally, there were no options outstanding or exercisable at December 31, 2020 or 2019.  There was no compensation cost for stock options in 2020 and 2019.  As of December 31, 2020, there was no unrecognized cost related to nonvested stock options granted under the Company’s stock-based compensation plans.

Restricted stock awards have vesting periods of up to three years.  A summary of changes in the Company’s nonvested restricted stock awards for the year follows:

Compensation cost related to restricted stock awards totaled $505,000 and $427,000 for 2020 and 2019, respectively.

As of December 31, 2020, there was $1.4 million of total remaining unrecognized compensation cost related to nonvested restricted stock awards granted under the Company’s stock-based compensation plans.  The cost is expected to be recognized over a weighted-average period of 1.55 years.  The total grant date fair value of restricted stock awards vested during 2020 was $483,000.  The total grant date fair value of restricted stock awards vested during 2019 was $368,000.