Share-Based Payments

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

Employee Stock Purchase Plan

The 1999 Employee Stock Purchase Plan authorizes the issuance of 1,400,000 common shares, allowing eligible employees to purchase our common shares through payroll withholding at a discount of up to 15% off the market price at the end of each six-month purchase period. Employee withholding amounts may not be less than $10 or more than $2,000 per month, subject to certain limitations, as described in the plan. A plan participant may cease making payroll deductions at any time. A participant may not purchase more than 2,000 shares in a given six month purchase period under the plan and may not purchase more than $25,000 (fair market value) of common shares under the plan and all other purchase plans (if any) in a calendar year. A participant may withdraw from the plan at any time and elect to receive the balance of their contributions to the plan that have not yet been used to purchase shares in cash. Shares purchased under the plan are automatically enrolled in the Company's dividend reinvestment plan. Shares purchased under the plan may not be assigned, transferred, pledged, or otherwise disposed, except for certain situations allowed by the plan, such as upon death, for a period of 18 months after purchase. For purchase periods between January 1, 2018 and June 30, 2019, the purchase price was 100% of the market price at the end of each six-month purchase period. For purchase periods beginning after June 30, 2019, the purchase price is 85% of the market price at the end of each six-month purchase period. At our discretion, shares purchased under the plan can be either new issue shares or shares purchased in the open market. The plan shall automatically terminate when all of the shares authorized under the plan have been issued.

We recognize the 15% discount to the fair market value of the purchased shares as stock-based compensation expense, which amounted to $0.2 million, $0.2 million and $0.1 million for the years ended December 31, 2021, 2020, and 2019. For the years ended December 31, 2021, 2020, and 2019 the amount of shares issued under the plan amounted to 27,975, 31,661 and 17,104 shares. As of December 31, 2021, there was 290,127 shares available for purchase under the plan.

Share-Based Compensation Plan

The 2014 Stock Incentive Plan, which was approved by our shareholders in April 2014, authorizes the issuance of 1,900,000 common shares for the granting of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards and other stock and stock-based awards. As of December 31, 2021, 722,200 shares were available for issuance under the plan. The plan terminates on December 31, 2023.

We grant restricted stock awards to our employees and members of our Board of Directors and stock performance awards to our executive officers and certain other key employees as part of our long-term compensation and retention program. Stock-based compensation cost, recognized within operating expenses in the consolidated statements of income, amounted to $6.7 million, $6.1 million and $5.9 million for the years ended December 31, 2021, 2020 and 2019. The related income tax benefit recognized for these periods amounted to $1.8 million, $2.1 million and $2.3 million.

Restricted Stock Awards. Restricted stock awards are granted to employees and members of the Company's Board of Directors. The awards vest, depending on award recipient, either ratably over a period of three to four years or cliff vest after four years. Vesting is accelerated in certain circumstances, including upon retirement. Awards granted to members of the Board of Directors are issued and outstanding upon grant and carry the same voting and dividend rights of unrestricted outstanding common stock. Awards granted to executive officers and other key employees are eligible to receive dividend equivalent payments during the vesting period, subject to forfeiture under the terms of the agreement, but such awards are not issued or outstanding upon grant and do not provide for voting rights.

The grant date fair value of each restricted stock award is determined based on the market price of the Company's common stock on the date of grant adjusted to exclude the value of dividends for those awards that do not receive dividend or dividend equivalent payments during the vesting period.

The following is a summary of restricted stock award activity for the year ended December 31, 2021:


	Shares	Weighted Average Grant-Date Fair Value

Nonvested, Beginning of Year	128,664	$	44.30
Granted	59,150	43.55
Vested	(47,646)	42.98
Forfeited	(2,075)	40.95
Nonvested, End of Year	138,093	$	44.48

The weighted-average grant date fair value of granted awards was $43.55, $45.97 and $48.18 during the years ended December 31, 2021, 2020 and 2019. The fair value of vested awards was $2.1 million, $2.8 million and $2.4 million during the years ended December 31, 2021, 2020 and 2019. As of December 31, 2021, there was $2.4 million of unrecognized compensation costs for non-vested restricted stock awards to be recognized over a weighted-average period of 1.83 years.

Stock Performance Awards. Stock performance awards are granted to executive officers and certain other key employees. The awards vest at the end of a three-year performance period. The number of common shares awarded, if any, at the end of the performance period ranges from zero to 150% of the target amount based on two performance measures: i) total shareholder return relative to a peer group and ii) return on equity. The awards have no voting or dividend rights during the vesting period. Vesting of the awards is accelerated in certain circumstances, including upon retirement. The amount of common shares awarded on an accelerated vesting is based either on actual performance at the end of the performance period or the amount of common shares earned at target.

The grant date fair value of stock performance awards granted during the years ended December 31, 2021, 2020 and 2019 was determined using a Monte Carlo fair value simulation model incorporating the following assumptions:


	2021		2020		2019

Risk-free interest rate	0.18	%	1.42	%	2.52	%
Expected term (in years)	3.00		3.00		3.00
Expected volatility	32.00	%	19.00	%	21.00	%
Dividend yield	3.60	%	2.80	%	3.00	%

The risk-free interest rate was derived from yields on U.S. government bonds of a similar term. The expected term of the award is equal to the three-year performance period. Expected volatility was estimated based on actual historical volatility of our common stock over a three- or five-year period. Dividend yield was estimated based on historic and future yield estimates.

The following is a summary of stock performance award activity for the year ended December 31, 2021 (share amounts reflect awards at target):


	Shares	Weighted Average Grant-Date Fair Value

Nonvested, Beginning of Year	164,600	$	42.32
Granted	79,000	38.34
Vested	(54,000)	35.73
Forfeited	—	—
Nonvested, End of Year	189,600	$	42.54

The weighted-average grant date fair value of granted awards was $38.34, $47.79 and $42.87 during the years ended December 31, 2021, 2020 and 2019. The fair value of vested awards was $2.5 million, $3.4 million and $6.1 million during the years ended December 31, 2021, 2020 and 2019. As of December 31, 2021, there was $0.4 million of unrecognized compensation costs of non-vested stock performance awards to be recognized over a weighted-average period of 1.19 years.