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STOCK-BASED COMPENSATION PLANS

12 Months Ended

Dec. 31, 2021

NOTE L: STOCK-BASED COMPENSATION PLANS

The Company has a long-term incentive program for directors, officers and employees. Under this program, the Company initially authorized four million shares of Company common stock for the grant of incentive stock options, nonqualified stock options, restricted stock awards, and retroactive stock appreciation rights. The long-term incentive program was amended effective May 25, 2011, May 14, 2014 and May 17, 2017 to authorize an additional 900,000 shares, 1,000,000 shares and 1,000,000 shares of Company common stock, respectively, for the grant of incentive stock options, nonqualified stock options, restricted stock awards, and retroactive stock appreciation rights. As of December 31, 2021, the Company has authorization to grant up to approximately 0.6 million additional shares of Company common stock for these instruments. The nonqualified (offset) stock options in its Director’s Stock Balance Plan vest and become exercisable immediately and expire one year after the date the director retires or two years in the event of death. The remaining options have a ten-year term, and vest and become exercisable on a grant-by-grant basis, ranging from immediate vesting to ratably over a five-year period.

Activity in this long-term incentive program is as follows:


	Stock Options
		Weighted-
		average Exercise
	Outstanding	Price of Shares
Outstanding at December 31, 2019	1,502,994	$	42.82
Granted	254,496		51.68
Exercised	(197,564)		32.65
Forfeited	(17,667)		50.97
Outstanding at December 31, 2020	1,542,259		45.49
Granted	168,976		79.68
Exercised	(310,423)		40.17
Forfeited	(8,107)		61.56
Outstanding at December 31, 2021	1,392,705		50.73
Exercisable at December 31, 2021	879,074	$	43.84

The following table summarizes the information about stock options outstanding under the Company’s stock option plan at December 31, 2021:


	Options outstanding				Options exercisable
		Weighted-		Weighted-		Weighted-
		average		average		average
		Exercise		Remaining		Exercise
Range of Exercise Price	Shares	Price		Life (years)	Shares	Price
$0.00 – $29.00	57,354	$	24.78	3.55	57,354	$	24.78
$29.01 – $30.00	58,276		29.79	1.21	58,276		29.79
$30.01 – $40.00	403,901		37.07	3.46	403,901		37.07
$40.01 – $60.00	706,389		55.54	6.91	352,515		56.30
$60.01 – $80.00	166,785		79.68	9.22	7,028		79.66
TOTAL	1,392,705	$	50.73	5.81	879,074	$	43.84

The weighted-average remaining contractual term of outstanding and exercisable stock options at December 31, 2021 is 5.81 years and 4.56 years, respectively. The aggregate intrinsic value of outstanding and exercisable stock options at December 31, 2021 is $33.9 million and $27.0 million, respectively.

The Company recognized stock-based compensation expense related to non-qualified stock options of $2.6 million, $2.7 million and $2.2 million for the years ended December 31, 2021, 2020 and 2019, respectively. A related income tax benefit was recognized of $0.6 million, $0.7 million and $0.5 million for the 2021, 2020 and 2019 years, respectively. Compensation expense related to restricted stock vesting recognized in the income statement for 2021, 2020 and 2019 was approximately $3.3 million, $3.3 million and $2.8 million, respectively.

Management estimated the fair value of options granted using the Black-Scholes option-pricing model. This model was originally developed to estimate the fair value of exchange-traded equity options, which (unlike employee stock options) have no vesting period or transferability restrictions. As a result, the Black-Scholes model is not necessarily a precise indicator of the value of an option, but it is commonly used for this purpose. The Black-Scholes model requires several assumptions, which management developed based on historical trends and current market observations.


	2021			2020			2019
Weighted-average Fair Value of Options Granted	$	18.43		$	10.86		$	14.16
Assumptions:
Weighted-average expected life (in years)		6.50			6.50			6.50
Future dividend yield		2.48	%		2.57	%		2.73	%
Share price volatility		30.09	%		29.29	%		29.31	%
Weighted-average risk-free interest rate		1.28	%		0.67	%		2.44	%

Unrecognized stock-based compensation expense related to non-vested stock options totaled $5.5 million at December 31, 2021. The weighted-average period over which this unrecognized expense would be recognized is 3.3 years. The total fair value of stock options vested during 2021, 2020, and 2019 were $2.5 million, $2.5 million and $2.4 million, respectively.

During the 12 months ended December 31, 2021 and 2020, proceeds from stock option exercises totaled $14.2 million and $7.5 million, respectively, and the related tax benefits from exercise were approximately $1.8 million and $1.2 million, respectively. During the twelve months ended December 31, 2021 and 2020, approximately 0.3 million and 0.2 million shares, respectively, were issued in connection with stock option exercises each year. The total intrinsic value of options exercised during 2021, 2020 and 2019 were $10.3 million, $6.6 million and $11.6 million, respectively.

A summary of the status of the Company’s unvested restricted stock awards as of December 31, 2021, and changes during the twelve months ended December 31, 2021 and 2020, is presented below:


	Restricted	Weighted-average
	Shares	grant date fair value
Unvested at December 31, 2019	196,788	$	45.58
Awards	52,132		51.64
Forfeitures	(12,884)		37.14
Vestings	(59,628)		47.80
Unvested at December 31, 2020	176,408		47.24
Awards	51,456		79.51
Forfeitures	(2,619)		54.15
Vestings	(47,977)		52.84
Unvested at December 31, 2021	177,268	$	54.98

Unrecognized stock-based compensation expense related to unvested restricted stock totaled $7.1 million at December 31, 2021, which will be recognized as expense over the next five years. The weighted-average period over which this unrecognized expense would be recognized is 3.7 years. The total fair value of restricted stock vested during 2021, 2020, and 2019 were $2.5 million, $2.9 million and $3.8 million, respectively.