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SHARE-BASED COMPENSATION PLANS

12 Months Ended

Dec. 31, 2020

18. SHARE-BASED COMPENSATION PLANS

At December 31, 2020, 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 2020 and 2019. 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 2020 and 2019 vest ratably over five years and expire 10 years from the grant date. Restricted stock granted in 2020 and 2019 vests ratably over four years. As of December 31, 2020, there were approximately 663,000 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. 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. No shares were withheld in 2020. In 2019, approximately 11,000 shares were withheld, and were based on the value of the stock on the exercise dates. Total payments made by the Company for the employees’ tax obligations to the taxing authorities were $0 in 2020 and $5,000 in 2019; such payments are reflected as a financing activity within the consolidated statements of cash flows.

In accordance with ASC 718, share-based compensation expense of approximately $1.4 million and $1.5 million was recognized in 2020 and 2019, respectively, for stock options and restricted stock awards granted since 2015. An estimate of forfeitures, based on historical data, was included in the calculation of share-based compensation.

At December 31, 2020, there was $1.5 million of total unrecognized compensation cost related to non-vested stock options granted in the years 2017 through 2020 which is expected to be recognized over the weighted-average remaining vesting period of 3.2 years. At December 31, 2019, there was $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 3.5 years.

The following weighted-average assumptions were used to determine compensation expense related to stock options in 2020 and 2019:


	2020		2019
Risk-free interest rate	0.54	%	1.55	%
Expected dividend yield	5.33	%	4.11	%
Expected term	8.0		8.0
Expected volatility	26.4	%	24.0	%

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


	Years ended December 31,
	2020				2019
			Weighted Average				Weighted Average
Stock Options	Shares		Exercise Price		Shares		Exercise Price
Outstanding at beginning of year		1,176,770	$	27.14		1,173,620	$	27.96
Granted		188,600		18.00		192,650		23.45
Exercised		—		—		(18,795)		27.75
Forfeited or expired		(239,987)		27.09		(170,705)		28.56
Outstanding at end of year		1,125,383	$	25.62		1,176,770	$	27.14

Exercisable at end of year		640,012	$	26.77		703,030	$	26.71

Weighted average fair market value of options granted	$	2.01			$	3.32


	Weighted Average Remaining
	Contractual Life (in Years)	Aggregate Intrinsic Value
Outstanding - December 31, 2020	5.4	$	—
Exercisable - December 31, 2020	3.1	$	—

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, 2020 of $15.84 and the exercise price multiplied by the number of in-the-money outstanding and exercisable stock options. The respective exercise prices of all of the Company’s outstanding stock operations were higher than the closing price of the Company’s common stock as of December 31, 2020, therefore, the aggregate intrinsic value of the Company’s stock options is zero.

Non-vested Stock Options


		Weighted Average		Weighted Average
	Number of Options	Exercise Price		Fair Value
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
Granted	188,600		18.00		2.01
Vested	(165,824)		27.48		3.99
Forfeited	(11,145)		27.54		4.27
Non-vested - December 31, 2020	485,371	$	24.08	$	3.48

The following table summarizes information about outstanding and exercisable stock options at December 31, 2020:


	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
$18.00	188,600	9.7	$	18.00	—	$	—
$23.38 to $25.86	623,050	3.4	$	24.93	477,884	$	25.40
$27.04 to $37.22	313,733	7.1	$	31.55	162,128	$	30.80
	1,125,383	5.4	$	25.62	640,012	$	26.77

The following table summarizes stock option activity for the years ended December 31:


	2020		2019

	(Dollars in thousands)
Total intrinsic value of stock options exercised	$	—	$	87
Net proceeds from stock option exercises	$	—	$	161
Income tax benefit from the exercise of stock options	$	—	$	23
Total fair value of stock options vested	$	661	$	750

Restricted Stock

The following table summarizes restricted stock award activity during the years ended December 31, 2019 and 2020:


	Shares of Restricted	Weighted Average
	Stock	Grant Date Fair Value
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
Issued	30,800		18.00
Vested	(27,045)		28.04
Forfeited	—		—
Non-vested - December 31, 2020	72,490	$	23.77

At December 31, 2020, the Company expected 72,490 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 $1.1 million at December 31, 2020. The aggregate intrinsic value was calculated using the market value of the Company’s stock on December 31, 2020 of $15.84 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 $127,000 in 2020 and $152,000 in 2019.