7. Stock plans

The Company has two stock-based compensation plans (the stock compensation plans) from which it can grant stock-based compensation awards and applies the fair value method of accounting for stock-based compensation provided under current accounting guidance. The guidelines require the cost of share-based payment transactions (including those with employees and non-employees) be recognized in the financial statements. The Company’s stock compensation plans were shareholder-approved and permit the grant of share-based compensation awards to its employees and directors. The Company believes that the stock-based compensation plans will advance the development, growth and financial condition of the Company by providing incentives through participation in the appreciation in the value of the Company’s common stock. In return, the Company hopes to secure, retain and motivate the employees and directors who are responsible for the operation and the management of the affairs of the Company by aligning the interest of its employees and directors with the interest of its shareholders. In the stock compensation plans, employees and directors are eligible to be awarded stock-based compensation grants which can consist of stock options (qualified and non-qualified), stock appreciation rights (SARs) and restricted stock.

At the 2012 annual shareholders’ meeting, the Company’s shareholders approved and the Company adopted the 2012 Omnibus Stock Incentive Plan and the 2012 Director Stock Incentive Plan (collectively, the 2012 stock incentive plans). Unless terminated by the Company’s board of directors, the 2012 stock incentive plans will expire on and no stock-based awards shall be granted after the year 2022.

In each of the 2012 stock incentive plans, the Company has reserved 750,000 shares of its no-par common stock for future issuance. The Company recognizes share-based compensation expense over the requisite service or vesting period. During 2015, the Company created a Long-Term Incentive Plan (LTIP) that awarded restricted stock and stock-settled stock appreciation rights (SSARs) to senior officers based on the attainment of performance goals. The service requirement was the participant’s continued employment throughout the LTIP with a three-year vesting period. Prior to the 2020 grants, the restricted stock had a two-year post vesting holding period requirement. The SSAR awards have a ten-year term from the date of each grant. During the first quarter of 2019, the Company approved a 1 year LTIP and awarded restricted stock and SSARs to senior officers and managers in February 2019 based on 2018 performance. During the first quarter of 2020, the Company approved a 1 year LTIP and awarded restricted stock to senior officers and managers in February and March 2020 based on 2019 performance.

The following table summarizes the weighted-average fair value and vesting of restricted stock grants awarded during the periods ended March 31, 2020 and 2019 under the 2012 stock incentive plans:



	March 31, 2020				March 31, 2019
			Weighted-				Weighted-
			average				average
	Shares		grant date		Shares		grant date
	granted		fair value		granted		fair value

Director plan	6,000	(3)	$	56.63	5,600	(2)	$	54.69
Omnibus plan	11,761	(3)		55.06	7,251	(2)		54.69
Omnibus plan	50	(1)		57.62	50	(1)		58.08
Total	17,811		$	55.59	12,901		$	54.70

(1) Vest after 1 year (2) Vest after 3 years – 33% each year (3) Vest fully after 3 years

The fair value of the shares granted in the first quarter of 2020 was calculated using the grant date stock price.

A summary of the status of the Company’s non-vested restricted stock as of and changes during the period indicated are presented in the following table:



	2012 Stock incentive plans
	Director	Omnibus	Total		Weighted- average grant date fair value
Non-vested balance at December 31, 2019	11,200	15,961	27,161	$	49.48
Granted	6,000	11,811	17,811		55.59
Vested	(4,664)	(7,597)	(12,261)		46.94
Non-vested balance at March 31, 2020	12,536	20,175	32,711	$	53.76

A summary of the status of the Company’s SSARs as of and changes during the period indicated are presented in the following table:



	Awards		Weighted-average grant date fair value	Weighted-average remaining contractual term (years)
Outstanding December 31, 2019	97,264	$	9.47	7.5
Granted	-		-
Exercised	-		-
Forfeited	-		-
Outstanding March 31, 2020	97,264	$	9.47	7.2

Of the SSARs outstanding at March 31, 2020, 76,897 vested and were exercisable. SSARs vest over a three-year period – 33% per year.

During 2019, there were 3,059 SSARs exercised. The intrinsic value recorded for these SSARs was $10,631. The tax deduction realized from the exercise of these SSARs was $108,134 resulting in a tax benefit of $22,708.

Share-based compensation expense is included as a component of salaries and employee benefits in the consolidated statements of income. The following tables illustrate stock-based compensation expense recognized on non-vested equity awards during the three months ended March 31, 2020 and 2019 and the unrecognized stock-based compensation expense as of March 31, 2020:



	Three months ended March 31,
(dollars in thousands)	2020			2019
Stock-based compensation expense:
Director stock incentive plan	$	78	$	59
Omnibus stock incentive plan		170		148
Employee stock purchase plan		27		107
Total stock-based compensation expense	$	275	$	314

In addition, during the three months ended March 31, 2020, the Company reversed accruals of ($32 thousand) in stock-based compensation expense for restricted stock and SSARs awarded under the Omnibus Plan. During the three months ended March 31, 2019, the Company reversed accruals of ($35 thousand) in stock-based compensation expense.


	As of
(dollars in thousands)	March 31, 2020
Unrecognized stock-based compensation expense:
Director plan	$	626
Omnibus plan		1,262
Total unrecognized stock-based compensation expense	$	1,888

The unrecognized stock-based compensation expense as of March 31, 2020 will be recognized ratably over the periods ended January 2023 and January 2023 for the Director Plan and the Omnibus Plan, respectively.

In addition to the 2012 stock incentive plans, the Company established the 2002 Employee Stock Purchase Plan (the ESPP) and reserved 165,000 shares of its un-issued capital stock for issuance under the plan. The ESPP was designed to promote broad-based employee ownership of the Company’s stock and to motivate employees to improve job performance and enhance the financial results of the Company. Under the ESPP, participation is voluntary whereby employees use automatic payroll withholdings to purchase the Company’s capital stock at a discounted price based on the fair market value of the capital stock as measured on either the commencement or termination dates, as defined. As of March 31, 2020, 84,904 shares have been issued under the ESPP. The ESPP is considered a compensatory plan and is required to comply with the provisions of current accounting guidance. The Company recognizes compensation expense on its ESPP on the date the shares are purchased, and it is included as a component of salaries and employee benefits in the consolidated statements of income.