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SHARE-BASED COMPENSATION PLANS | 12 Months Ended
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Dec. 31, 2019
SHARE-BASED COMPENSATION PLANS |
SHARE-BASED COMPENSATION PLANS | 19. SHARE-BASED COMPENSATION PLANS At December 31, 2019, the Company had two share-based compensation plans: the 2014 Incentive Plan and the 2017 Incentive Plan (collectively, “the Plans”). Awards are no longer granted under the 2014 Incentive Plan; however, awards previously granted under such plan continue in accordance with their terms. Options to purchase common stock were granted to officers and key employees at exercise prices not less than the fair market value of the Company’s common stock on the date of the grant, and the Company also grants restricted stock awards. The Company issues new common stock to satisfy stock option exercises as well as the issuance of restricted stock awards. Stock options and restricted stock awards were granted in both 2019 and 2018. Stock options and restricted stock awards are valued at fair market value based on the Company’s closing stock price on the date of grant. Stock options granted in 2019 and 2018 vest ratably over five years and expire 10 years from the grant date. Restricted stock granted in 2019 and 2018 vests ratably over four years. As of December 31, 2019, there were approximately 882,000 shares remaining available for share-based awards under the 2017 Incentive Plan. Stock option exercises can be net share settled such that the Company withholds shares with value equivalent to the exercise price of the stock option awards plus the employees’ minimum statutory obligation for the applicable income and other employment taxes. Total shares withheld were approximately 11,000 and 204,000 in 2019 and 2018, respectively, and were based on the value of the stock on the exercise dates. The net share settlement has the effect of share repurchases by the Company as they reduce the number of shares that would have otherwise been issued. Total payments made by the Company for the employees’ tax obligations to the taxing authorities were $5,000 and $699,000 in 2019 and 2018, respectively, and are reflected as a financing activity within the consolidated statements of cash flows. In accordance with ASC 718, share-based compensation expense was recognized in the 2019 and 2018 consolidated financial statements for stock options and restricted stock awards granted since 2014. An estimate of forfeitures, based on historical data, was included in the calculation of share-based compensation. The effect of applying the expense recognition provisions of ASC 718 decreased Earnings before Provision for Income Taxes by $1,452,000 in 2019, and by $1,513,000 in 2018. At December 31, 2019, there was $1.7 million of total unrecognized compensation cost related to non-vested stock options granted in the years 2016 through 2019 which is expected to be recognized over the weighted-average remaining vesting period of 3.5 years. At December 31, 2019, there was also $1.7 million of total unrecognized compensation cost related to non-vested restricted stock awards granted in the years 2016 through 2019, which is expected to be recognized over the weighted-average remaining vesting period of 2.7 years. The following weighted-average assumptions were used to determine compensation expense related to stock options in 2019 and 2018:
|  | 2019 |  | 2018 |
Risk-free interest rate |  | 1.55 | % | 2.80 | %
Expected dividend yield |  | 4.11 | % | 2.47 | %
Expected term |  | 8.0 |  | 8.0 |
Expected volatility |  | 24.0 | % | 19.9 | %
The risk-free interest rate is based on U.S. Treasury bonds with a remaining term equal to the expected term of the award. The expected dividend yield is based on the Company’s expected annual dividend as a percentage of the market value of the Company’s common stock in the year of grant. The expected term of the stock options is determined using historical experience. The expected volatility is based upon historical stock prices over the most recent period equal to the expected term of the award. The following tables summarize stock option activity under the Company’s plans: Stock Options
|  | Year ended December 31,
|  | 2019 |  | 2018
|  |  |  |  | Weighted Average |  |  |  |  | Weighted Average
Stock Options |  | Shares |  | Exercise Price |  | Shares |  | Exercise Price
Outstanding at beginning of year |  |  | 1,173,620 |  | $ | 27.96 |  |  | 1,502,493 |  | $ | 26.57
Granted |  |  | 192,650 |  |  | 23.45 |  |  | 129,200 |  |  | 37.22
Exercised |  |  | (18,795) |  |  | 27.75 |  |  | (429,047) |  |  | 25.96
Forfeited or expired |  |  | (170,705) |  |  | 28.56 |  |  | (29,026) |  |  | 26.67
Outstanding at end of year |  |  | 1,176,770 |  | $ | 27.14 |  |  | 1,173,620 |  | $ | 27.96
Exercisable at end of year |  |  | 703,030 |  | $ | 26.71 |  |  | 692,007 |  | $ | 26.92
Weighted average fair market value of options granted |  | $ | 3.32 |  |  |  |  | $ | 7.07 |  |  |
|  | Weighted Average Remaining Contractual |  |  |
|  | Life (in Years) |  | Aggregate Intrinsic Value
Outstanding - December 31, 2019 |  | 4.7 |  | $ | 808,000
Exercisable - December 31, 2019 |  | 2.4 |  | $ | 171,000
The aggregate intrinsic value of outstanding and exercisable stock options is defined as the difference between the market value of the Company’s stock on December 31, 2019 of $26.45 and the exercise price multiplied by the number of in-the-money outstanding and exercisable stock options. Non-vested Stock Options
|  |  |  | Weighted Average |  | Weighted Average
|  | Number of Options |  | Exercise Price |  | Fair Value
Non-vested - December 31, 2017 |  | 625,362 |  | $ | 26.55 |  | $ | 3.43
Granted |  | 129,200 |  |  | 37.22 |  |  | 7.07
Vested |  | (243,798) |  |  | 26.42 |  |  | 3.25
Forfeited |  | (29,151) |  |  | 26.67 |  |  | 3.46
Non-vested - December 31, 2018 |  | 481,613 |  | $ | 29.46 |  | $ | 4.49
Granted |  | 192,650 |  |  | 23.45 |  |  | 3.32
Vested |  | (193,838) |  |  | 27.59 |  |  | 3.87
Forfeited |  | (6,685) |  |  | 29.94 |  |  | 4.87
Non-vested - December 31, 2019 |  | 473,740 |  | $ | 27.77 |  | $ | 4.26
The following table summarizes information about outstanding and exercisable stock options at December 31, 2019:
|  | Options Outstanding |  | Options Exercisable
|  |  |  | Weighted |  |  |  |  |  |  |
|  |  |  | Average |  | Weighted |  |  |  | Weighted
|  | Number of |  | Remaining |  | Average |  | Number of |  | Average
|  | Options |  | Contractual Life |  | Exercise |  | Options |  | Exercise
Range of Exercise Prices |  | Outstanding |  | (in Years) |  | Price |  | Exercisable |  | Price
$23.38 to $25.86 |  | 632,950 |  | 4.4 |  | $ | 24.92 |  | 381,925 |  | $ | 25.59
$27.04 to $37.22 |  | 543,820 |  | 5.0 |  | $ | 29.72 |  | 321,105 |  | $ | 28.05
|  | 1,176,770 |  | 4.7 |  | $ | 27.14 |  | 703,030 |  | $ | 26.71
The following table summarizes stock option activity for the years ended December 31:
|  | 2019 |  | 2018
|  | (Dollars in thousands)
Total intrinsic value of stock options exercised |  | $ | 87 |  | $ | 3,822
Net proceeds from stock option exercises |  | $ | 161 |  | $ | 4,403
Income tax benefit from the exercise of stock options |  | $ | 23 |  | $ | 994
Total fair value of stock options vested |  | $ | 750 |  | $ | 793
Restricted Stock The following table summarizes restricted stock award activity during the years ended December 31, 2018 and 2019:
|  | Shares of Restricted |  | Weighted Average
|  | Stock |  | Grant Date Fair Value
Non-vested - December 31, 2017 |  | 66,050 |  | $ | 26.79
Issued |  | 25,319 |  |  | 37.22
Vested |  | (25,514) |  |  | 27.49
Forfeited |  | (4,375) |  |  | 26.60
Non-vested - December 31, 2018 |  | 61,480 |  | $ | 30.74
Issued |  | 31,000 |  |  | 23.48
Vested |  | (23,745) |  |  | 29.10
Forfeited |  | — |  |  | —
Non-vested - December 31, 2019 |  | 68,735 |  | $ | 28.04
At December 31, 2019, the Company expected 68,735 shares of restricted stock to vest over a weighted-average remaining contractual term of 2.7 years. These shares had an aggregate intrinsic value of $1.8 million at December 31, 2019. The aggregate intrinsic value was calculated using the market value of the Company’s stock on December 31, 2019 of $26.45 multiplied by the number of non-vested restricted shares outstanding. The income tax benefit from the vesting of restricted stock for the years ended December 31 was $152,000 in 2019 and $249,000 in 2018.

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- Definition The entire disclosure for share-based payment arrangement. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 + Details
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