SHARE-BASED COMPENSATION PLANS

The Company maintains share-based compensation plans under the shareholder-approved 2011 Plan. The purpose of the share-based compensation plans is to provide officers, employees, and non-employee members of the Board of Directors of the Company with additional incentive to further the success of the Company. At the 2018 Annual Meeting of Shareholders on May 1, 2018, the Company's shareholders approved an increase in the number of shares available for issuance to 881,920 shares and extended the term of the 2011 Plan to May 31, 2028, subject to any future extensions. At September 30, 2018, 881,920 shares of the common stock of the Company were reserved to be issued and 525,814 shares were available to be issued.

The 2011 Plan incentive awards may consist of grants of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, deferred stock units and performance shares. All employees of the Company and its present or future subsidiaries, and members of the Board of Directors of the Company or any subsidiary of the Company, are eligible to participate in the 2011 Plan. The 2011 Plan allows for the Compensation Committee of the Board of Directors to determine the type of incentive to be awarded, its term, manner of exercise, vesting of awards and restrictions on shares. Generally, awards are nonqualified under the IRC, unless the awards are deemed to be incentive awards to employees at the Compensation Committee’s discretion.

The following table presents a summary of nonvested restricted shares activity for the nine months ended September 30, 2018.



	Shares		Weighted Average Grant Date Fair Value
Nonvested shares, beginning of year	268,411		$	18.18
Granted	87,317		25.64
Forfeited	(30,854	)	16.88
Vested	(40,424	)	18.67
Nonvested shares, at period end	284,450		$	20.34

The following table presents restricted shares compensation expense, with tax benefit information, and fair value of shares vested, for the three and nine months ended September 30, 2018 and 2017.



	Three months ended September 30,				Nine months ended September 30,
(Dollars in thousands)	2018		2017		2018		2017
Restricted share award expense	$	179	$	371	$	1,099	$	1,031
Restricted share award tax benefit	38		126		231		351
Fair value of shares vested	0		25		1,056		288

The unrecognized compensation expense related to the share awards totaled $2,644,000 at September 30, 2018 and $2,035,000 at December 31, 2017. The unrecognized compensation expense at September 30, 2018 is expected to be recognized over a weighted-average period of 1.8 years.

The following table presents a summary of outstanding stock options activity for the nine months ended September 30, 2018.



	Shares		Weighted Average Exercise Price
Outstanding, beginning of year	59,583		$	25.89
Forfeited	(2,235	)	28.02
Expired	(15,214	)	30.11
Exercised	(1,150	)	21.14
Options outstanding and exercisable, at period end	40,984		$	24.34

The exercise price of each option equals the market price of the Company’s stock on the grant date. An option’s maximum term is ten years. All options are fully vested upon issuance. The following table presents information pertaining to options outstanding and exercisable at September 30, 2018.



Range of Exercise Prices	Number Outstanding	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price
$21.14 - $24.99	31,519	1.65	$	21.51
$25.00 - $34.99	2,792	1.50	25.76
$35.00 - $37.59	6,673	0.81	37.10
$21.14 - $37.59	40,984	1.50	$	24.34

Outstanding and exercisable options had an intrinsic value of $74,000 at September 30, 2018 and $127,000 at December 31, 2017.

The Company maintains an employee stock purchase plan to provide employees of the Company an opportunity to purchase Company common stock. Eligible employees may purchase shares in an amount that does not exceed 10% of their annual salary, at the lower of 95% of the fair market value of the shares on the semi-annual offering date or related purchase date. The Company reserved 350,000 shares of its common stock to be issued under the employee stock purchase plan. At September 30, 2018, 173,465 shares were available to be issued.

The following table presents information for the employee stock purchase plan for the three and nine months ended September 30, 2018 and 2017.



	Three months ended September 30,				Nine months ended September 30,
(Dollars in thousands except share information)	2018		2017		2018		2017
Shares purchased	2,951		3,518		5,907		6,632
Weighted average price of shares purchased	$	22.61	$	21.33	$	23.04	$	20.57
Compensation expense recognized	10		11		14		17
Tax benefits	2		4		3		6

The Company issues new shares or treasury shares, depending on market conditions, in its share-based compensation plans.