COMPENSATION PLANS

The Company has adopted share-based compensation plans to reward and provide long-term incentive for directors and key employees of the Company including its subsidiaries. These plans provide for the granting of stock, stock options, stock-settled stock appreciation rights (“SSARs”), and restricted stock units (“RSUs”), and may contain performance terms as designated by the Company’s Board of Directors upon the recommendation of the Compensation Committee of the Board. The Company uses authorized and unissued shares to satisfy share award exercises. At December 31, 2018, there were 7,413 shares of stock available for grant under the Stock Plan for Non-Management Directors, and 632,246 shares available for grant under the 2018 Stock Incentive Plan.

The total excess income tax benefit for share-based compensation arrangements was $1.6 million, $2.1 million, and $1.3 million for the years ended December 31, 2018, 2017, and 2016, respectively.

The following table summarizes share-based compensation expense:



(in thousands)	2018		2017		2016
Performance stock units	$	2,067	$	2,451	$	2,477
Restricted stock units	1,211		898		850
Employee stock issuance - restricted stock	—		78		40
Employee stock purchase plan	174		—		—
Total share-based compensation expense	$	3,452	$	3,427	$	3,367

Performance Units

The Company has entered into long-term incentive agreements with certain key employees. These awards are conditioned on certain performance criteria and market criteria measured against a group of peer banks over a three-year period for each grant. The awards contain minimum (threshold), target, and maximum (exceptional) performance levels. In the event of a change in control, as defined in the plan, the awards will vest at a minimum of the target level. The amount of the awards are determined at the end of the three year vesting and performance period. In January 2019, the Company awarded 99,308 shares to employees upon completion of the 2016-2018 performance cycle. In January 2018, the Company awarded 134,600 shares to employees upon completion of the 2015-2017 performance cycle. In February 2017, the Company awarded 118,519 shares to employees upon completion of the 2014-2016 performance cycle.

Information related to the outstanding grants at December 31, 2018 is shown below:



(in thousands, except share and per share data)	2017 - 2019 Cycle		2018 - 2020 Cycle
Shares issuable at target	53,767		15,726
Maximum shares issuable	66,827		31,452
Unrecognized compensation cost	$	939	$	862
Weighted average grant date fair value	40.72		50.19

In 2018 and 2017, stock-based compensation expense for these awards included an additional $0.1 million, and $0.3 million, respectively, related to modifications made for retiring executives. The modification allows for portions of outstanding performance awards to continue to vest as though employment had not terminated and will be paid based on actual performance as determined by the compensation committee following completion of the applicable performance period.

Restricted Stock Units

The Company awards nonvested stock, in the form of RSUs to employees. RSUs generally are subject to continued employment and vest ratably over two to five years. Shares issued to the Bank’s directors for compensation are not subject to vesting requirements. Vesting is accelerated upon a change in control or the employee meeting certain retirement criteria. RSUs do not carry voting or dividend rights until vested. Sales of the units are restricted prior to vesting. Various information related to the RSUs is shown below.



($ in thousands)	2018		2017		2016
Total fair value at vesting date	$	1,544	$	1,471	$	2,275
Total unrecognized compensation cost for nonvested stock units	2,175		837		1,084
Expected years to recognize unearned compensation	2.0 years		1.8 years		1.6 years

A summary of the status of the Company’s RSU awards as of December 31, 2018 and changes during the year then ended is presented below



	Shares		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2017	41,222		$	34.34
Granted	57,271		47.58
Vested	(28,720	)	31.04
Forfeited	(2,746	)	43.62
Outstanding at December 31, 2018	67,027		$	46.69

Employee Stock Options and Stock-settled Stock Appreciation Rights

In determining compensation cost for stock options and SSARs, the Black-Scholes option-pricing model is used to estimate the fair value on date of grant. There were no grants of employee stock options or SSARs during the years ended December 31, 2018, 2017, or 2016.

Stock options have been granted to key employees with exercise prices equal to the market price of the Company’s common stock at the date of grant and 10-year contractual terms. Stock options have a vesting schedule of three to five years. The SSARs are subject to continued employment, have a 10-year contractual term and vest ratably over five years. Neither stock options nor SSARs carry voting or dividend rights until exercised. At December 31, 2018, there was no remaining unrecognized compensation expense related to stock options and SSARs and all outstanding awards are vested. Various information related to the stock options and SSARs is shown below.



(in thousands)	2018		2017		2016
Intrinsic value of option exercises on date of exercise	$	2,469	$	3,156	$	1,156
Cash received from the exercise of stock options	—		91		87

Following is a summary of the employee stock option and SSAR activity for 2018.



(in thousands, except share and per share data)	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at December 31, 2017	106,130		$	13.37
Granted	—		—
Exercised	(65,480	)	15.37
Forfeited	—		—
Outstanding at December 31, 2018	40,650		$	10.14	1.6 years	$	1,118
Exercisable at December 31, 2018	40,650		$	10.14	1.6 years	$	1,118

Employee Stock Purchase Plan

The Company adopted an Employee Stock Purchase Plan (“ESPP”) in 2018 to provide its eligible employees with an opportunity to purchase common stock through accumulated contributions. The ESPP provides for shares to be purchased at 85% of the lesser of the stock price at the enrollment date or the exercise date. The maximum number of shares of common stock available for sale under the ESPP is 750,000. In 2018, employees purchased 14,799 shares.

Stock Plan for Non-Management Directors

The Company has adopted a Stock Plan for Non-Management Directors, which provides for issuing up to 200,000 shares of common stock to non-management directors as compensation in lieu of cash. At December 31, 2018, there were 7,413 shares of stock available for grant under the Stock Plan for Non-Management Directors.

Various information related to the Director Plan is shown below.



(in thousands, except share and per share data)	2018		2017		2016
Shares granted	11,750		10,531		12,528
Weighted average fair value	$	50.74	$	42.46	$	31.25

401(k) plans

The Company has a 401(k) savings plan which covers substantially all full-time employees over the age of 21. The amount charged to expense for the Company’s contributions to the plan was $2.8 million, $2.0 million and $1.7 million for 2018, 2017, and 2016, respectively.