At December 31, 2019 and 2018, the Company has reserved the following shares of its authorized but unissued common stock for possible future issuance in connection with the following:



	December 31, 2019	December 31, 2018
Outstanding performance units (maximum issuance)	73,172	98,279
Outstanding RSU’s	117,369	67,027
Outstanding options and appreciation rights	28,300	40,650
Future awards under 2018 Stock Incentive Plan	521,573	632,246
Future awards under Non-Management Director Plan	96,031	7,413
2018 Employee Stock Purchase Plan	694,085	735,201
Total	1,530,530	1,580,816

In May 2015, the Company’s board of directors authorized the repurchase of up to two million shares of the Company’s common stock. The repurchases may be made in open market or privately negotiated transactions and the stock

repurchase program will remain in effect until fully utilized or until modified, superseded or terminated. At December 31, 2019, there were 552,158 shares available for repurchase under the plan.

The Company has 5,000,000 shares of authorized preferred stock with a par value of $0.01. The Board of Directors has the right to set for each series of preferred stock, subject to the laws of the State of Delaware, the dividend rate, conversion and redemption terms, voting rights and liquidation preferences, among others. At December 31, 2019 and 2018 there were no shares of preferred stock outstanding.

The Company’s ability to pay dividends to its shareholders is generally dependent upon the payment of dividends by the Bank to the parent company. The Bank cannot pay dividends to the extent it would be deemed undercapitalized by the FDIC after making such dividend.

Dividends on the Company’s capital stock are prohibited under the terms of the junior subordinated debenture agreements, see “Note 11 - Subordinated Debentures,” if the Company is in continuous default on its payment obligations to the capital trusts, has elected to defer interest payments on the debentures or extends the interest payment period. At December 31, 2019, the Company was not in default on any of the junior subordinated debenture issuances.



(in thousands)	Net Unrealized Gain (Loss) on Available-for-Sale Debt Securities			Unamortized Gain (Loss) on Held-to-Maturity Securities			Net Unrealized Loss on Cash Flow Hedges			Total
Balance, December 31, 2016	$	(1,533	)	$	(208	)	$	—		$	(1,741	)
Net change	(2,089		)	12			—			(2,077		)
Balance, December 31, 2017	(3,622		)	(196		)	—			(3,818		)
Net change	(4,633		)	3			—			(4,630		)
Adjustment for change in accounting policies	(792		)	(42		)	—			(834		)
Balance, December 31, 2018	(9,047		)	(235		)	—			(9,282		)
Net change	29,226			(33		)	(2,162		)	27,031
Transfer from available-for-sale to held-to-maturity	(5,202		)	5,202			—			—
Balance, December 31, 2019	$	14,977		$	4,934		$	(2,162	)	$	17,749



	Amounts Reclassified from Other Comprehensive Income (Loss)
(in thousands)	2019			2018			2017			Affected Line Item in the Statements of Operations
Realized gain (loss) on securities available-for-sale, net	$	(49	)	$	9		$	22		Noninterest income (expense)
Loss on cash flow hedges	(133		)	—			—			Interest income (expense)
Reclassifications before tax	(182		)	9			22			Total before income tax expense
Tax effect	45			(2		)	(9		)	Income tax (expense) benefit
Total reclassifications, net of tax	$	(137	)	$	7		$	13		Net income

The Company has adopted share-based compensation plans to reward and provide long-term incentive for directors and key employees of the Company including its subsidiaries. These plans provide for the granting of stock, stock options, stock-settled stock appreciation rights (“SSARs”), and restricted stock units (“RSUs”), and may contain performance terms as designated by the Company’s Board of Directors upon the recommendation of the Compensation Committee of the Board. The Company uses authorized and unissued shares to satisfy share award exercises.

The total excess income tax benefit for share-based compensation arrangements was $0.5 million, $1.6 million, and $2.1 million for the years ended December 31, 2019, 2018, and 2017, respectively. At December 31, 2019, there was $4.6 million of total unrecognized compensation cost related to unvested share-based compensation awards. The cost is expected to be recognized over a weighted-average period of 2 years.



(in thousands)	2019		2018		2017
Performance stock units	$	1,699	$	2,067	$	2,451
Restricted stock units	1,969		1,211		898
Employee stock issuance - restricted stock	—		—		78
Employee stock purchase plan	364		174		—
Total share-based compensation expense	$	4,032	$	3,452	$	3,427

The Company has entered into long-term incentive agreements with certain key employees. These awards are conditioned on certain performance criteria and market criteria measured against a group of peer banks over a three-year period for each grant. The awards contain minimum (threshold), target, and maximum (exceptional) performance levels. In the event of a change in control, as defined in the plan, the awards will vest at a minimum of the target level. The amount of the awards is determined at the end of the three year vesting and performance period. In January 2020, the Company awarded 62,649 shares to employees upon completion of the 2017-2019 performance cycle. In January 2019, the Company awarded 99,308 shares to employees upon completion of the 2016-2018 performance cycle. In January 2018, the Company awarded 134,600 shares to employees upon completion of the 2015-2017 performance cycle.



($ in thousands)	2018 - 2020 Cycle		2019 - 2021 Cycle
Shares issuable at target	15,726		20,860
Maximum shares issuable	31,452		41,720
Unrecognized compensation cost	$	440	$	705
Weighted average grant date fair value	50.19		47.46

In 2018, stock-based compensation expense for these awards included an additional $0.1 million related to modifications made for retiring executives. The modification allows for portions of outstanding performance awards to continue to vest as though employment had not terminated and will be paid based on actual performance as determined by the compensation committee following completion of the applicable performance period.

The Company awards nonvested stock, in the form of RSUs to employees. RSUs generally are subject to continued employment and generally vest ratably over two to five years. Shares issued to the Bank’s directors for compensation are not subject to vesting requirements. Vesting is accelerated upon a change in control or the employee meeting certain retirement criteria. RSUs do not carry voting or dividend rights until vested. Sales of the units are restricted prior to vesting. Various information related to the RSUs is shown below.



($ in thousands)	2019		2018		2017
Total fair value at vesting date	$	1,067	$	1,544	$	1,471
Total unrecognized compensation cost for nonvested stock units	3,417		2,175		837
Expected years to recognize unearned compensation	1.9 years		2.0 years		1.8 years

A summary of the status of the Company’s RSU awards as of December 31, 2019 and changes during the year then ended is presented below



	Shares		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2018	67,027		$	46.69
Granted	77,227		45.00
Vested	(23,842	)	45.38
Forfeited	(3,043	)	46.04
Outstanding at December 31, 2019	117,369		$	45.86

In determining compensation cost for stock options and SSARs, the Black-Scholes option-pricing model is used to estimate the fair value on date of grant. There were no grants of employee stock options or SSARs during the years ended December 31, 2019, 2018, or 2017.

Stock options have been granted to key employees with exercise prices equal to the market price of the Company’s common stock at the date of grant and 10-year contractual terms. Stock options have a vesting schedule of three to five years. The SSARs are subject to continued employment, have a 10-year contractual term and vest ratably over five years. Neither stock options nor SSARs carry voting or dividend rights until exercised. At December 31, 2019, there was no remaining unrecognized compensation expense related to stock options and SSARs and all outstanding awards are vested. Various information related to the stock options and SSARs is shown below.



($ in thousands, except per share data)	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at December 31, 2018	40,650		$	10.14
Exercised	(12,350	)	10.14
Outstanding at December 31, 2019	28,300		$	10.14	0.6 years	$	1,077
Exercisable at December 31, 2019	28,300		$	10.14	0.6 years	$	1,077

The Company adopted an Employee Stock Purchase Plan (“ESPP”) in 2018 to provide its eligible employees with an opportunity to purchase common stock through accumulated contributions. The ESPP provides for shares to be purchased at 85% of the lesser of the stock price at the enrollment date or the exercise date. The maximum number of shares of common stock available for sale under the ESPP is 750,000. In 2019 and 2018, employees purchased 41,116 and 14,799 shares, respectively.

The Company has adopted a Stock Plan for Non-Management Directors, which provides for issuing up to 200,000 shares of common stock to non-management directors as compensation in lieu of cash. At December 31, 2019, there were 96,031 shares of stock available for grant under the Stock Plan for Non-Management Directors.

The Company has a 401(k) savings plan which covers substantially all full-time employees over the age of 21. The amount charged to expense for the Company’s contributions to the plan was $3.2 million, $2.8 million and $2.0 million for 2019, 2018, and 2017, respectively.

The Company’s Deferred Compensation Plan permits certain executives to participate and defer up to 25% of their base salary and/or up to 100% of their eligible bonus for a plan year. Participants make an irrevocable election when they elect to participate for a plan year to receive the vested account balance following their retirement date, or at a future date not less than five years after the beginning of the plan year. At December 31, 2019, the Company had assets and liabilities of $3.5 million and $4.9 million, respectively, related to the Deferred Compensation Plan.