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Note 21: Stock Compensation Plans

12 Months Ended

Dec. 31, 2018

Notes

Note 21: Stock Compensation Plans

Note 21:    Stock Compensation Plans

The Company established the 2003 Stock Option and Incentive Plan (the “2003 Plan”) for employees and directors of the Company and its subsidiaries.  Under the plan, stock options or other awards could be granted with respect to 598,224 shares of common stock.  On May 15, 2013, the Company’s stockholders approved the Great Southern Bancorp, Inc. 2013 Equity Incentive Plan (the “2013 Plan”).  Upon the stockholders’ approval of the 2013 Plan, the Company’s 2003 Plan was frozen.  As a result, no new stock options or other awards may be granted under the 2003 Plan; however, existing outstanding awards under the 2003 Plan were not affected.  At December 31, 2018, 81,023 options were outstanding under the 2003 Plan.

The Company established the 2013 Stock Option and Incentive Plan (the “2013 Plan”) for employees and directors of the Company and its subsidiaries.  Under the plan, stock options or other awards could be granted with respect to 700,000 shares of common stock.  On May 9, 2018, the Company’s stockholders approved the Great Southern Bancorp, Inc. 2018 Omnibus Incentive Plan (the “2018 Plan”).  Upon the stockholders’ approval of the 2018 Plan, the Company’s 2013 Plan was frozen.  As a result, no new stock options or other awards may be granted under the 2013 Plan; however, existing outstanding awards under the 2003 Plan were not affected.  At December 31, 2018, 507,063 options were outstanding under the 2013 Plan.

The 2018 Plan provides for the grant from time to time to directors, emeritus directors, officers, employees and advisory directors of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and performance units.  The number of shares of Common Stock available for awards under the 2018 Plan is 800,000 (the “2018 Plan Limit”).  Shares utilized for awards other than stock options and stock appreciation rights will be counted against the 2018 Plan Limit on a 2.5-to-1 basis.  At December 31, 2018, 185,150 options were outstanding under the 2018 Plan.

Stock options may be either incentive stock options or nonqualified stock options, and the option price must be at least equal to the fair value of the Company’s common stock on the date of grant.  Options generally are granted for a 10-year term and generally become exercisable in four cumulative annual installments of 25% commencing two years from the date of grant.  The Stock Option Committee may accelerate a participant’s right to purchase shares under the plan.

Stock awards may be granted to key officers and employees upon terms and conditions determined solely at the discretion of the Stock Option Committee.

The table below summarizes transactions under the Company’s stock compensation plans, all of which related to stock options granted under such plans:

					Weighted
	Available to Grant		Shares Under Option		Average Exercise Price
Balance, January 1, 2016	331,450		633,732		$       31.297
Granted from 2013 Plan	(131,000)		131,000		41.228
Exercised	—		(81,812)		26.472
Forfeited from terminated plan(s)	—		(2,692)		22.654
Forfeited from current plan(s)	19,025		(19,025)		39.123
Balance, December 31, 2016	219,475		661,203		33.672
Granted from 2013 Plan	(157,800)		157,800		52.118
Exercised	—		(119,692)		27.352
Forfeited from terminated plan(s)	—		(675)		24.690
Forfeited from current plan(s)	15,837		(15,837)		41.916
Balance, December 31, 2017	77,512		682,799		38.860
Granted from 2013 Plan	(1,000)		1,000		52.500
Exercised	—		(81,940)		27.597
Forfeited from 2013 Plan	13,773		(13,773)		45.692
Termination of 2013 Plan	(90,285)		—
	—		588,086
Available to grant from 2018 Plan	800,000		—
Granted from 2018 Plan	(185,750)		185,750		55.297
Forfeited from current plan(s)	600		(600)		55.000
Balance, December 31, 2018	614,850		773,236		$       43.886

The Company’s stock option grants contain terms that provide for a graded vesting schedule whereby portions of the options vest in increments over the requisite service period.  These options typically vest one-fourth at the end of years two, three, four and five from the grant date.  As provided for under FASB ASC 718, the Company has elected to recognize compensation expense for options with graded vesting schedules on a straight-line basis over the requisite service period for the entire option grant.  In addition, ASC 718 requires companies to recognize compensation expense based on the estimated number of stock options for which service is expected to be rendered.  The Company’s historical forfeitures of its share-based awards have not been material.

The fair value of each option award is estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions for the years ended December 31, 2018, 2017 and 2016:

	2018	2017	2016
Expected dividends per share	$1.27	$0.95	$0.88
Risk-free interest rate	2.86%	2.03%	1.27%
Expected life of options	5 years	5 years	5 years
Expected volatility	17.61%	23.49%	22.08%
Weighted average fair value of
options granted during year	$8.30	$10.04	$6.59

Expected volatilities are based on the historical volatility of the Company’s stock, based on the monthly closing stock price.  The expected term of options granted is based on actual historical exercise behavior of all employees and directors and approximates the graded vesting period of the options.  Expected dividends are based on the annualized dividends declared at the time of the option grant.  The risk-free interest rate is based on the five-year treasury rate on the grant date of the options.

The following table presents the activity related to options under all plans for the year ended December 31, 2018:

			Weighted
		Weighted	Average
		Average	Remaining
		Exercise	Contractual
	Options	Price	Term
Options outstanding, January 1, 2018	682,799	$38.860	7.38 years
Granted	186,750	55.282
Exercised	(81,940)	27.597
Forfeited	(14,373)	46.081
Options outstanding, December 31, 2018	773,236	43.886	7.44 years
Options exercisable, December 31, 2018	266,742	32.233	5.15 years

For the years ended December 31, 2018, 2017 and 2016, options granted were 186,750, 157,800, and 131,000, respectively.  The total intrinsic value (amount by which the fair value of the underlying stock exceeds the exercise price of an option on exercise date) of options exercised during the years ended December 31, 2018, 2017 and 2016, was $2.2 million, $3.0 million and $1.4 million, respectively.  Cash received from the exercise of options for the years ended December 31, 2018, 2017 and 2016, was $2.3 million, $3.3 million and $2.1 million, respectively.  The actual tax benefit realized for the tax deductions from option exercises totaled $1.6 million, $2.7 million and $1.3 million for the years ended December 31, 2018, 2017 and 2016, respectively.  The total intrinsic value of options outstanding at December 31, 2018, 2017 and 2016, was $4.7 million, $8.8 million and $13.9 million, respectively.  The total intrinsic value of options exercisable at December 31, 2018, 2017 and 2016, was $3.9 million, $5.7 million and $7.5 million, respectively.

The following table presents the activity related to nonvested options under all plans for the year ended December 31, 2018. 

		Weighted	Weighted
		Average	Average
		Exercise	Grant Date
	Options	Price	Fair Value
Nonvested options, January 1, 2018	441,937	$44.842	$7.981
Granted	186,750	55.282	8.297
Vested this period	(107,895)	38.433	6.398
Nonvested options forfeited	(14,298)	46.057	8.143
Nonvested options, December 31, 2018	506,494	50.023	8.431

At December 31, 2018, there was $3.8 million of total unrecognized compensation cost related to nonvested options granted under the Company’s plans.  This compensation cost is expected to be recognized through 2023, with the majority of this expense recognized in 2019 and 2020.

The following table further summarizes information about stock options outstanding at December 31, 2018:

	Options Outstanding
		Weighted		Options Exercisable
		Average	Weighted		Weighted
		Remaining	Average		Average
Range of	Number	Contractual	Exercise	Number	Exercise
Exercise Prices	Outstanding	Term	Price	Exercisable	Price
$16.810 to 29.640	139,920	3.89 years	$25.093	139,920	$25.093
$32.590 to 38.610	97,047	5.87 years	33.038	62,291	32.819
$41.300 to 47.800	111,436	7.80 years	41.357	24,658	41.386
$50.710 to 52.500	239,683	8.11 years	51.608	39,873	50.710
$55.000 to 59.750	185,150	9.88 years	55.298	—	—
	773,236	7.44 years	43.886	266,742	32.233

X

- Definition

Tabular disclosure of components of a stock option or other award plan under which equity-based compensation is awarded to employees, typically comprised of the amount of unearned compensation (deferred compensation cost), compensation expense, and changes in the quantity and fair value of the shares (or other type of equity) granted, exercised, forfeited, and issued and outstanding pertaining to that plan. Disclosure may also include nature and general terms of such arrangements that existed during the period and potential effects of those arrangements on shareholders, effect of compensation cost arising from equity-based payment arrangements on the income statement, method of estimating the fair value of the goods or services received, or the fair value of the equity instruments granted, during the period, cash flow effects resulting from equity-based payment arrangements and, for registrants that accelerate vesting of out of the money share options, reasons for the decision to accelerate.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 718
-SubTopic 10
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=109197908&loc=d3e5047-113901

Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 718
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=109197908&loc=d3e5070-113901

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