Stock-Based Compensation

6 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [Abstract]

The Company previously awarded equity as a form of compensation under a stock-based incentive plan (the “2016 Plan”). The 2016 Plan was approved by the Company’s stockholders on September 1, 2016. The 2016 Plan provided for grants of stock options, stock appreciation rights (“SARs”), restricted stock, performance shares, and performance units (sometimes referred to individually or collectively as “awards”) to non-employee directors, employees, and potentially consultants of the Company. The 2016 Plan initially had 2,400,000 shares that were available for grant to participants.

On May 23, 2019 the Company’s stockholders approved another stock-based incentive plan (the “2019 Plan”) which provides for grants of stock options, SARs, restricted stock, performance shares, and performance units to non-employee directors, employees, and potentially consultants of the Company. Stock options may be either incentive stock options (“ISOs”), as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), or nonqualified stock options (“NQSOs”). The 2019 Plan replaces the 2016 Plan and stipulates that no further awards shall be made under prior plans. Therefore, future awards will only be issued from the 2019 Plan.

The 2019 Plan provides the Company flexibility to (i) attract and retain qualified non-employee directors, executives, other key employees, and consultants with appropriate equity-based awards to; (ii) motivate high levels of performance; (iii) recognize employee contributions to the Company’s success; and (iv) align the interests of the participants with those of the Company’s stockholders. The 2019 Plan initially had 4,400,000 shares that were available for grant to participants. The exercise price for shares under an ISO may not be less than 100% of fair market value on the date the award is granted under the Code. Similarly, under the terms of the plans, the exercise price for SARs and NQSOs may not be less than 100% of fair market value on the date of grant. Performance units are awarded to participants at the market price of the Company’s common stock on the date of award (after the lapse of the restriction period and the attainment of the performance criteria). All options not exercised generally expire 10 years after the date of grant.

ISOs, SARs, and NQSOs have vesting periods of three to five years and have 10-year contractual terms. Restricted stock, performance shares, and performance units are granted with a restriction period of not less than one year from the grant date for performance-based awards and not more than three years from the grant date for time-based vesting of grants. Compensation expense for awards is recognized over the vesting period.

Under the 2019 Plan, 4,026,459 shares were available for future grants as of June 30, 2019.

With the exception of the shares underlying stock options and restricted stock awards, the Board of Directors may choose to settle the awards by paying the equivalent cash value or by delivering the appropriate number of shares.

The following is a summary of stock option activity under the 2016 Plan and 2019 Plan for the six months ended June 30, 2019:



	Number of Shares		Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value (Dollars in thousands)
Outstanding - January 1, 2019	982,631		$	15.41
Granted	—		—
Exercised	—		—
Expired	(18,962	)	16.67
Forfeited	(18,000	)	17.18
Outstanding - June 30, 2019	945,669		$	15.35	5.99	$	926
Options exercisable - June 30, 2019	799,669		$	15.02	5.78	$	926

The following is a summary of restricted stock and performance unit activity under the 2016 Plan and 2019 Plan for the six months ended June 30, 2019:



	Number of Shares		Weighted- Average Grant Date Fair Value
Outstanding (unvested) - January 1, 2019	478,891		$	16.37
Granted	756,153		13.16
Vested	(84,755	)	16.79
Forfeited	(40,986	)	15.60
Outstanding (unvested) - June 30, 2019	1,109,303		$	14.18

The total fair value of restricted stock and performance units vested for the six months ended June 30, 2019 and 2018 was $1.2 million and $1.2 million, respectively.

In 2017, the Company adopted the Hope Employee Stock Purchase Plan (“ESPP”) which allows eligible employees to purchase the Company’s common shares through payroll deductions which build up between the offering date and the purchase date. At the purchase date, the Company uses the accumulated funds to purchase shares in the Company on behalf of the participating employees at a 10% discount to the closing price of the Company’s common shares. The closing price is the lower of either the closing price on the first day of the offering period or on the closing price on the purchase date. The dollar amount of common shares purchased under the ESPP must not exceed 20% of the participating employee’s base salary, subject to a cap of $25 thousand in stock value based on the grant date. The ESPP is considered compensatory under GAAP and compensation expense for the ESPP is recognized as part of the Company’s stock-based compensation expenses. The compensation expense for ESPP during the three months ended June 30, 2019 and 2018 was $29 thousand and $41 thousand, respectively. The compensation expense for ESPP during the six months ended June 30, 2019 and 2018 was $125 thousand and $189 thousand, respectively.

The total amount charged against income related to stock-based payment arrangements, including ESPP, was $1.5 million and $915 thousand for the three months ended June 30, 2019 and 2018, respectively. For the six months ended June 30, 2019 and 2018, $2.3 million and $1.9 million, respectively, of stock-based payment arrangements were charged against income. The income tax benefit recognized was approximately $378 thousand and $237 thousand for the three months ended June 30, 2019 and 2018, respectively. The income tax benefit recognized for the six months ended June 30, 2019 and 2018, was approximately $585 thousand and $482 thousand, respectively.

At June 30, 2019, the unrecognized compensation expense related to non-vested stock option grants was $338 thousand, and is expected to be recognized over a weighted average vesting period of 2.17 years. Unrecognized compensation expense related to non-vested restricted stock and performance units was $11.0 million, and is expected to be recognized over a weighted average vesting period of 2.22 years.