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STOCK BASED COMPENSATION | 12 Months Ended
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Dec. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] |
STOCK BASED COMPENSATION | The Company's stock based plans include the Second Amended and Restated 2005 Employee Stock Plan (“2005 Plan”), the 2010 Non-Employee Director Stock Plan ("the 2010 Plan") and the 2018 Non-Employee Director Stock Plan (“2018 Plan”), all of which have been approved by the Company’s Board of Directors and shareholders. Due to the expiration of the 2010 plan on May 17, 2018, the Company may only award shares from the 2005 Plan or the 2018 Plan. These shares may be awarded as either stock option awards or restricted stock awards from its pool of authorized but unissued shares. The following table presents the amount of cumulatively granted stock option awards and restricted stock awards, net of forfeitures and expirations, through December 31, 2018:
|  |  | Authorized Awards | Cumulatively Granted, Net of Forfeitures and Expirations |  | Total |  | Authorized but Unissued |
| Stock Option Awards |  | Restricted Stock Awards |
| 2005 Plan |  | 1,650,000 |  | 387,258 |  |  | 750,931 |  |  | 1,138,189 |  |  | 511,811 |  |
| 2010 Plan |  | 314,600 |  | 46,500 |  |  | 93,245 |  |  | 139,745 |  |  | 174,855 |  | (1)
| 2018 Plan |  | 300,000 |  | — |  |  | 6,000 |  |  | 6,000 |  |  | 294,000 |  | (1)
(1) | The Company may award up to a total of 300,000 shares from the 2018 Plan, inclusive of 174,855 shares that were Authorized but Unissued in the 2010 Plan, and were transferred from the 2010 Plan to the 2018 Plan. Due to this transfer, there are no available shares remaining to be issued from the 2010 Plan.
The following table presents the pre-tax expense associated with stock option and restricted stock awards and the related tax benefits recognized for the periods presented:
| Years Ended December 31
| 2018 |  | 2017 |  | 2016
| (Dollars in thousands)
Stock based compensation expense |  |  |  |  |
Restricted stock awards(1) | $ | 3,299 |  |  | $ | 2,730 |  |  | $ | 2,590 |
Directors’ fee expense |  |  |  |  |
Stock options | 66 |  |  | 76 |  |  | 72 |
Restricted stock awards | 860 |  |  | 527 |  |  | 303 |
Total stock based award expense | $ | 4,225 |  |  | $ | 3,333 |  |  | $ | 2,965 |
Related tax benefits recognized in earnings | $ | 1,188 |  |  | $ | 1,362 |  |  | $ | 1,211 |
(1) | Inclusive of compensation expense associated with time-vested and performance-based restricted stock awards.
Expense related to awards issued to directors is recognized as directors’ fees within other noninterest expense. The Company has standard form agreements used for stock option and restricted stock awards. The standard form agreements used for the Chief Executive Officer and all other Executive Officers have previously been disclosed in Securities and Exchange Commission filings and generally provide that: (1) any unvested options or unvested restricted stock vest upon a Change of Control; and, that (2) any stock options which vest pursuant to a Change of Control, which is an event described in Section 280G of the Internal Revenue Code of 1986, will be cashed out at the difference between the acquisition price and the exercise price of the stock option. Stock Options The fair value of each stock option grant is estimated on the date of the grant using the Black-Scholes option-pricing model with the following assumptions used for grants under the identified plans:
• | Expected volatility is based on the standard deviation of the historical volatility of the weekly adjusted closing price of the Company’s shares for a period equivalent to the expected life of the option.
• | Expected life represents the period of time that the option is expected to be outstanding, taking into account the contractual term, historical exercise/forfeiture behavior, and the vesting period, if any.
• | Expected dividend yield is an annualized rate calculated using the most recent dividend payment at time of grant and the Company’s average trailing twelve-month daily closing stock price.
• | The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for a period equivalent to the expected life of the option.
• | Prior to January 1, 2017, the stock based compensation expense recognized in earnings was based on the amount of awards ultimately expected to vest, therefore a forfeiture assumption was estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differed from those estimates. Stock based compensation expense recognized was reduced for annualized estimated forfeitures of 4.5% in 2016 based on historical experience. Effective January 1, 2017, the Company adopted new accounting guidance and elected to no longer estimate forfeitures on stock compensation and instead recognize forfeitures when they occur. The election required a cumulative effect adjustment to retained earnings which did not materially impact the Company's consolidated financial position.
The following table presents the awards granted by the Company of nonqualified options to purchase shares of common stock for the periods presented:
| Years Ended December 31
| 2018 |  | 2017 |  | 2016
Date of grant | 4/3/2018 |  |  | 11/7/2017 |  |  | 7/14/2016 |  | 2/20/2016 |
Plan | 2010 |  |  | 2010 |  |  | 2010 |  | 2010 |
Options granted | 5,000 |  |  | 5,000 |  |  | 5,000 |  | 5,000 |
Vesting period (beginning on the grant date) | 21 months |  |  | 14 months |  |  | 18 months |  | 22 months |
Expiration date | 4/3/2028 |  |  | 11/7/2027 |  |  | 7/14/2026 |  | 2/20/2026 |
Expected volatility | 21.15 | % |  | 20.80 | % |  | 32.28 | % | 32.44 | %
Expected life (years) | 5.5 |  |  | 5.5 |  |  | 5.5 |  | 5.5 |
Expected dividend yield | 1.94 | % |  | 1.87 | % |  | 2.37 | % | 2.28 | %
Risk free interest rate | 2.62 | % |  | 2.02 | % |  | 1.14 | % | 1.29 | %
Fair value per option | $ | 13.46 |  |  | $ | 12.43 |  |  | $ | 11.46 |  | $ | 10.59 |
Under all of the Company’s stock based plans, the option exercise price is based upon the average of the high and low trading value of the stock on the date of grant. Stock option awards granted to date under all plans expire at various dates through 2028. The following table presents relevant information relating to the Company’s stock options for the periods presented:
| Years Ended December 31
| 2018 |  | 2017 |  | 2016
| (Dollars in thousands, except per share data)
Fair value of stock options vested based on grant date fair value | $ | 85 |  |  | $ | 72 |  |  | $ | 37 |
Intrinsic value of stock options exercised | $ | 1,525 |  |  | $ | 1,082 |  |  | $ | 494 |
Cash received from stock option exercises | $ | 1,024 |  |  | $ | 918 |  |  | $ | 680 |
Tax benefit realized on stock option exercises | $ | 429 |  |  | $ | 442 |  |  | $ | 204 |
Weighted average grant date fair value of options granted (per share) | $ | 13.46 |  |  | $ | 12.43 |  |  | $ | 11.03 |
The following table presents a summary of stock option award activity for the year ended December 31, 2018.
| Outstanding |  | Nonvested |  |
| Stock Option Awards |  |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Term (years) |  | Aggregate Intrinsic Value (1) |  | Stock Option Awards |  |  | Weighted Average Grant Date Fair Value |  |
| (Dollars in thousands, except per share data) |  |
Balance at January 1, 2018 | 84,000 |  |  |  | $ | 32.16 |  |  |  |  |  |  | 4,999 |  |  |  | $ | 12.11 |  |  |
Granted | 5,000 |  |  |  | 70.85 |  |  |  |  |  |  | 5,000 |  |  |  | 13.46 |  |  |
Exercised | (34,500 | ) |  |  | 29.67 |  |  |  |  |  |  | n/a |  |  |  | n/a |  |  |
Vested | n/a |  |  |  | n/a |  |  |  |  |  |  | (6,667 | ) |  |  | 12.70 |  |  |
Forfeited | — |  |  |  | — |  |  |  |  |  |  | — |  |  |  | — |  |  |
Expired | — |  |  |  | — |  |  |  |  |  |  | — |  |  |  | — |  |  |
Balance at December 31, 2018 | 54,500 |  | (2) |  | $ | 37.28 |  |  | 4.02 years |  | $ | 1,776 |  |  | 3,332 |  |  |  | $ | 12.94 |  |  |
Options outstanding and expected to vest at December 31, 2018 | 54,500 |  | (3) |  | $ | 37.28 |  |  | 4.02 years |  | $ | 1,776 |  |  |  |  |  |  |  |
Options exercisable at December 31, 2018 | 51,168 |  | (4) |  | $ | 35.12 |  |  | 3.69 years |  | $ | 1,776 |  |  |  |  |  |  |  |
Unrecognized compensation cost |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 23 |
Weighted average remaining recognition period (years) |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1.00 |
(1) | The aggregate intrinsic value represents the total pre-tax intrinsic value, based on the average of the high price and low price at which the Company’s common stock traded on December 31, 2018 of $69.72, which would have been received by in-the-money option holders had they all exercised their options as of that date.
(2)Inclusive of 32,500 stock options outstanding to Directors. (3) Inclusive of 32,500 vested stock options and expected to vest to Directors. (4) Inclusive of 29,168 vested stock options outstanding to Directors. Restricted Stock The Company grants both time-vested restricted stock awards as well as performance-based restricted stock awards. During the years ended December 31, 2018, 2017, and 2016 the Company has made the following restricted stock award grants:
| Shares Granted |  | Plan |  | Fair Value (1) |  | Vesting Period
Time-vested |  |  |  |  |  |  |
2018 |  |  |  |  |  |  |
2/15/2018 | 39,950 |  |  | 2005 |  | $ | 71.75 |  |  | Ratably over 5 years from grant date
2/27/2018 | 1,150 |  |  | 2005 |  | $ | 72.60 |  |  | Ratably over 5 years from grant date
5/15/2018 | 530 |  |  | 2005 |  | $ | 74.00 |  |  | Ratably over 5 years from grant date
5/22/2018 | 6,000 |  |  | 2018 |  | $ | 76.58 |  |  | Immediately upon grant date
11/15/2018 | 560 |  |  | 2005 |  | $ | 77.78 |  |  | Ratably over 5 years from grant date
2017 |  |  |  |  |  |  |
2/13/2017 | 1,200 |  |  | 2005 |  | $ | 62.53 |  |  | Ratably over 5 years from grant date
2/16/2017 | 34,150 |  |  | 2005 |  | $ | 63.10 |  |  | Ratably over 5 years from grant date
3/31/2017 | 500 |  |  | 2005 |  | $ | 65.63 |  |  | Ratably over 5 years from grant date
4/3/2017 | 1,500 |  |  | 2005 |  | $ | 64.14 |  |  | Once on November 30, 2017 (2)
5/15/2017 | 1,000 |  |  | 2005 |  | $ | 64.03 |  |  | Ratably over 5 years from grant date
5/23/2017 | 7,000 |  |  | 2010 |  | $ | 61.95 |  |  | At the end of 5 years from grant date (3)
6/15/2017 | 950 |  |  | 2005 |  | $ | 66.18 |  |  | Ratably over 5 years from grant date
2016 |  |  |  |  |  |  |
2/11/2016 | 51,475 |  |  | 2005 |  | $ | 41.96 |  |  | Ratably over 5 years from grant date
3/1/2016 | 600 |  |  | 2005 |  | $ | 44.37 |  |  | Ratably over 5 years from grant date
5/24/2016 | 8,700 |  |  | 2010 |  | $ | 48.34 |  |  | Once on May 24, 2021 (3)
9/19/2016 | 800 |  |  | 2005 |  | $ | 52.92 |  |  | Ratably over 5 years from grant date
11/7/2016 | 500 |  |  | 2005 |  | $ | 54.28 |  |  | Ratably over 5 years from grant date
11/14/2016 | 725 |  |  | 2010 |  | $ | 63.43 |  |  | Once on May 24, 2021 (3)
Performance-based |  |  |  |  |  |  |
2/15/2018 | 16,300 |  |  | 2005 |  | $ | 71.75 |  |  | The earlier of: the date on which it is determined if the performance goal has been achieved; or, March 31, 2021.
2/16/2017 | 14,400 |  |  | 2005 |  | $ | 63.10 |  |  | The earlier of: the date on which it is determined if the performance goal has been achieved; or, March 31, 2020.
2/11/2016 | 20,450 |  |  | 2005 |  | $ | 41.96 |  |  | The earlier of: the date on which it is determined if the performance goal has been achieved; or, March 31, 2019.
(1) | The fair value of the restricted stock awards are based upon the average of the high and low prices at which the Company’s common stock traded on the date of grant. The holders of time-vested restricted stock awards participate fully in the rewards of stock ownership of the Company, including voting and dividend rights. The holders of performance-based restricted stock awards do not participate in the rewards of stock ownership of the Company until vested. The holders of all restricted stock awards are not required to pay any consideration to the Company for the awards.
(2) | This restricted stock grant fully vested upon an employee's termination, on November 30, 2017.
(3) | These restricted stock grants will vest on May 24, 2021, or earlier if the director ceases to be a director for any reason other than cause, such as, for example, by retirement.
The following table presents the fair value of restricted stock awards vesting for the periods presented:
| Years Ended December 31
| 2018 |  | 2017 |  | 2016
| (Dollars in thousands)
Fair value of restricted stock awards upon vesting | $ | 6,277 |  |  | $ | 5,717 |  |  | $ | 3,019 |
The following table presents a summary of restricted stock award activity for the year ended December 31, 2018:
| Outstanding Restricted Stock Awards |  |  | Weighted Average Grant Price ($) |  |
| (Dollars in thousands, except per share data) |  |
Balance at January 1, 2018 | 225,965 |  |  |  | $ | 46.18 |  |  |
Granted | 64,490 |  |  |  | 72.28 |  |  |
Vested/released | (86,219 | ) |  |  | 43.39 |  |  |
Forfeited | (2,130 | ) |  |  | 53.78 |  |  |
Balance at December 31, 2018 | 202,106 |  | (1) |  | $ | 55.62 |  |  |
Unrecognized compensation cost (inclusive of directors’ fees) |  |  |  |  |  | $ | 6,911 |
Weighted average remaining recognition period (years) |  |  |  |  |  | 2.96 |
(1) Inclusive of 23,385 restricted stock awards outstanding to Directors.

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -URI http://asc.fasb.org/subtopic&trid=2208855 + Details
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