11.

Stock-Based Compensation

For the years ended

December 31, 2017,

2016

and

2015

the Company’s net income, as reported, includes

$5.9

million,

$5.9

million and

$4.8

million, respectively, of stock-based compensation costs, including the benefit or expense of phantom stock awards, and

$1.9

million,

$2.3

million and

$1.7

million, respectively, of income tax benefits related to the stock-based compensation plans.

The Company uses the fair value of the common stock on the date of award to measure compensation cost for restricted stock unit awards. Compensation cost is recognized over the vesting period of the award using the straight line method. There were

276,900,

337,175

and

318,120

restricted stock units granted for the years ended

December 31, 2017,

2016

and

2015,

respectively.

stock options have been granted by the Company since

2009.

There are

1,200

options outstanding at an average weighted exercise price of

$13.91.

The

2014

Omnibus Incentive Plan (

“2014

Omnibus Plan”) became effective on

May 20, 2014

after adoption by the Board of Directors and approval by the stockholders. The

2014

Omnibus Plan authorizes the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”) to grant a variety of equity compensation awards as well as long-term and annual cash incentive awards, all of which can, but need

not,

be structured so as to comply with Section

162

(m) of the Internal Revenue Code of

1986,

as amended (the “Internal Revenue Code”). The

2014

Omnibus Plan authorizes the issuance of

1,100,000

shares. To the extent that an award under the

2014

Omnibus Plan is cancelled, expired, forfeited, settled in cash, settled by issuance of fewer shares than the number underlying the award, or otherwise terminated without delivery of shares to a participant in payment of the exercise price or taxes relating to an award, the shares retained by or returned to the Company will be available for future issuance under the

2014

Omnibus Plan.

further awards

may

be granted under the Company’s

2005

Omnibus Incentive Plan,

1996

Stock Option Incentive Plan, and

1996

Restricted Stock Incentive Plan (“Prior Plans”). On

May 31, 2017,

stockholders approved an amendment to the

2014

Omnibus Plan (the “Amendment”) authorizing an additional

672,000

shares available for future issuance. In addition, to increasing the number of shares for future grants, the Amendment eliminates, in the case of stock options and SARs, the ability to recycle shares used to satisfy the exercise price or taxes for such awards.

other amendments to the

2014

Omnibus Plan were made. Including the additional shares authorized from the Amendment,

954,003

shares are available for future issuance under the

2014

Omnibus Plan at

December 31, 2017.

To fund restricted stock unit awards or option exercises, shares are issued from treasury stock, if available; otherwise new shares are issued. Options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards granted under the

2014

Omnibus Plan are generally subject to a minimum vesting period of

three

years with stock options having a

-year maximum contractual term. Other awards do

not

have a contractual term of expiration. The Compensation Committee is authorized to grant awards that vest upon a participant’s retirement. These amounts are included in stock-based compensation expense at the time of the participant’s retirement eligibility.

The following table summarizes the Company’s restricted stock unit (“RSU”) awards under the

2014

Omnibus Plan and the Prior Plans in the aggregate for the year ended

December 31, 2017:

	Shares			Weighted-Average Grant-Date Fair Value

Non-vested at December 31, 2016		488,779		$	18.99
Granted		276,900			28.21
Vested		(244,762	)		21.93
Forfeited		(23,595	)		23.62
Non-vested at December 31, 2017		497,322		$	22.46

Vested but unissued at December 31, 2017		244,077		$	22.67

As of

December 31, 2017,

there was

$7.8

million of total unrecognized compensation cost related to RSU awards granted under the

2014

Omnibus Plan and the Prior Plans. That cost is expected to be recognized over a weighted-average period of

2.9

years. The total fair value of awards vested for the years ended

December 31, 2017,

2016

and

2015

were

$7.0

million,

$4.9

million and

$4.9

million, respectively. The vested but unissued RSU awards consist of awards made to employees and directors who are eligible for retirement. According to the terms of these awards, which provide for vesting upon retirement, these employees and directors have

risk of forfeiture. These shares will be issued at the original contractual vesting and settlement dates. As of

December 31, 2017,

there is

remaining unrecognized compensation cost related to stock options granted.

The following table summarizes certain information regarding the stock option awards under the

2014

Omnibus Plan and the Prior Plans in the aggregate for the year ended

December 31, 2017:

	Shares			Weighted- Average Exercise Price		Weighted-Average Remaining Contractual (years)		Aggregate Intrinsic Value ($000) *

Outstanding at December 31, 2016		5,600		$	9.61
Granted		-			-
Exercised		(4,400	)		8.44
Forfeited		-			-
Outstanding at December 31, 2017		1,200		$	13.91		0.8	$	16
Exercisable shares at December 31, 2017		1,200		$	13.91		0.8	$	16

* The intrinsic value of a stock option is the difference between the market value of the underlying stock and the exercise price of the option.

Cash proceeds, fair value received, tax benefits, and intrinsic value related to stock options exercised, during the years ended

December 31, 2017,

2016

and

2015

are provided in the following table:

(In thousands)	2017		2016		2015
Proceeds from stock options exercised	$	-	$	328	$	145
Fair value of shares received upon exercise of stock options		37		1,380		447
Tax benefit related to stock options exercised		39		185		99
Intrinsic value of stock options exercised		96		841		330

Phantom Stock Plan:

The Company maintains a non-qualified phantom stock plan as a supplement to its profit sharing plan for officers who have achieved the designated level and completed

one

year of service. However, certain officers who have

not

reached the designated level but were already participants remain eligible to participate in the Plan. Awards are made under this plan on certain compensation

not

eligible for contributions made under the profit sharing plan, due to the terms of the profit sharing plan and the Internal Revenue Code. Employees receive awards under this plan proportionate to the amount they would have received under the profit sharing plan, but for limits imposed by the profit sharing plan and the Internal Revenue Code. The awards are made as cash awards, and then converted to common stock equivalents (phantom shares) at the then current fair value of the Company’s common stock. Dividends are credited to each employee’s account in the form of additional phantom shares each time the Company pays a dividend on its common stock. In the event of a change of control (as defined in this plan), an employee’s interest is converted to a fixed dollar amount and deemed to be invested in the same manner as his interest in the Bank’s non-qualified deferred compensation plan. Employees vest under this plan

20%

per year for the

first

years of employment and are

100%

vested thereafter. Employees also become

100%

vested upon a change of control. Employees receive their vested interest in this plan in the form of a cash lump sum payment or installments, as elected by the employee, after termination of employment. The Company adjusts its liability under this plan to the fair value of the shares at the end of each period.

The following table summarizes the Company’s Phantom Stock Plan at or for the year ended

December 31, 2017:

Phantom Stock Plan	Shares			Fair Value

Outstanding at December 31, 2016		89,339		$	29.39
Granted		8,469			27.43
Forfeited		(10	)		28.95
Distributions		(8,618	)		28.72
Outstanding at December 31, 2017		89,180		$	27.50
Vested at December 31, 2017		88,895		$	27.50

The Company recorded stock-based compensation (benefit) expense for the phantom stock plan of (

$0.1

) million,

$0.7

million and

$0.2

million for the years ended

December 31, 2017,

2016

and

2015,

respectively. The total fair value of distributions from the phantom stock plan were

$247,000,

$45,000

and

$12,000

for the years ended

December 31, 2017,

2016

and

2015,

respectively.