5. SHARE-BASED COMPENSATION

Stock Options:

The Company has issued non-qualified and incentive stock options to employees and nonemployee directors. The fair value of these options are estimated on the date of grant using the Black-Scholes option pricing model, which requires estimates of the expected term of the option, the risk-free interest rate, the expected volatility of the price of the Company’s common stock, and dividend yield. Options outstanding as of March 31, 2018 generally vest over a period of three years and expire ten years from the date of grant. The exercise price of these options ranges from $26.52 to $66.68. Due to the Company’s lack of option exercise history, the expected term is calculated using the simplified method defined as the midpoint between the vesting period and the contractual term of each option. The risk free interest rate is based on the U.S. Treasury yield curve in effect on the date of grant that most closely corresponds to the expected term of the option. The expected volatility is based on the historical volatility of the Company’s common stock over the period of time equivalent to the expected term for each award. The weighted average input assumptions used were as follows:


	2018	2017

Expected term (in years)	6.4	6.0
Risk-free interest rate	2.64%	2.05%
Expected volatility	33.31%	38.33%
Dividend yield	2.88%	2.40%

The following table is a summary of our stock option activity:


	Three months ended March 31,
	2018			2017
	Shares	Weighted-Average Exercise Price		Shares	Weighted-Average Exercise Price
(shares in thousands)
Outstanding at beginning of period	106	$	31.18	129	$	28.22
Granted	51		66.68	38		44.73
Exercised	(21)		28.87	(21)		27.38
Forfeited	-		-	(9)		38.18
Outstanding at end of the period	136	$	44.79	137	$	32.20
Exercisable at end of the period	60	$	29.94	63	$	28.15

As of March 31, 2018, the weighted-average remaining contractual life was 8.44 years with an aggregate intrinsic value of $6.6 million for outstanding stock options and the weighted-average remaining contractual life was 7.27 years with an aggregate intrinsic value of $3.8 million for exercisable options. The weighted-average grant date fair value of options granted during the three months ended March 31, 2018 and 2017 was $17.79 and $13.73, respectively. The unrecognized compensation expense calculated under the fair value method for shares expected to vest as of March 31, 2018 was $1.1 million and is expected to be recognized over a weighted average period of 3.73 years. The Company received $62 thousand and $568 thousand in cash proceeds from the exercise of stock options during the three months ended March 31, 2018 and 2017, respectively. The total intrinsic value for options exercised during the three months ended March 31, 2018 and 2017 was $1.4 million and $325 thousand, respectively.

Restricted Stock:

The Company has issued restricted stock to employees and nonemployee directors generally with vesting terms up to five years after the date of grant. The fair value is equal to the market price of the Company’s common stock on the date of grant. Expense for restricted stock is amortized ratably over the vesting period. The following table summarizes our restricted stock activity:


	Three months ended March 31,
	2018			2017
	Shares	Weighted-Average Grant Date Fair Value		Shares	Weighted-Average Grant Date Fair Value
(shares in thousands)
Outstanding at beginning of period	129	$	32.15	215	$	27.69
Granted	16		66.68	44		44.73
Vested	(69)		28.35	(55)		25.94
Forfeited	-		-	(6)		32.80
Outstanding at end of the period	76	$	42.99	198	$	31.79

The total fair value of restricted stock awards vested during the three months ended March 31, 2018 and 2017 was $4.8 million and $2.4 million, respectively.

The total share-based compensation charged against income during the three months ended March 31, 2018 and 2017 was $805 thousand and $957 thousand, respectively. The total costs of the options and restricted stock awards charged against income during the three months ended March 31, 2018 and 2017 was $580 thousand and $733 thousand, respectively. Also included for the three months ended March 31, 2018 and 2017 was $73 thousand for 63,300 shares and $72 thousand for 147,675 shares, respectively, in expense that will vest based on certain market and performance conditions for certain key executives. Included for the three months ended March 31, 2018 and 2017 was $152 thousand in expense for 210,000 deferred shares that will vest based on certain performance conditions for our CEO.

The total income tax benefit recognized in the condensed consolidated statements of income for restricted stock awards was $917 thousand and $640 thousand for the three months ended March 31, 2018 and 2017, respectively.

There was $2.6 million of total unrecognized compensation cost related to restricted stock awards as of March 31, 2018, which is expected to be recognized over a weighted-average period of 1.87 years. There was $1.6 million of unrecognized compensation cost related to the 273,300 market and performance award shares discussed above as of March 31, 2018, which is expected to be recognized over a weighted-average period of 1.75 years.