Equity Incentive Plans

9 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement, Noncash Expense [Abstract]

Equity Incentive Plans

Equity Incentive Plan

All grants of common shares and options to purchase common shares were issued under the Company's 2007 Equity Incentive Plan prior to May 12, 2016 and under the 2016 Equity Incentive Plan on and after May 12, 2016. Under the 2016 Equity Incentive Plan, an aggregate of 1,950,000 common shares, options to purchase common shares and restricted share units, subject to adjustment in the event of certain capital events, may be granted. At September 30, 2019, there were 1,091,880 shares available for grant under the 2016 Equity Incentive Plan.

Share Options

Share options have exercise prices equal to the fair market value of a common share at the date of grant. The options may be granted for any reasonable term, not to exceed 10 years. The Company generally issues new common shares upon option exercise. A summary of the Company’s share option activity and related information is as follows:

 

	Number of options		Option price per share					Weighted avg. exercise price
Outstanding at December 31, 2018	234,875		$	19.02	—	$	76.63	$	51.98
Exercised	(118,786	)	19.02		—	61.79		48.71
Granted	1,941		73.84		—	73.84		73.84
Outstanding at September 30, 2019	118,030		$	44.62	—	$	76.63	$	55.63

The weighted average fair value of options granted was $4.64 and $3.03 during the nine months ended September 30, 2019 and 2018, respectively. The intrinsic value of share options exercised was $2.8 million and $0.1 million for the nine months ended September 30, 2019 and 2018, respectively.

The expense related to share options included in the determination of net income for the nine months ended September 30, 2019 and 2018 was $7 thousand and $0.2 million, respectively. The following assumptions were used in applying the Black-Scholes option pricing model at the grant dates for the nine months ended September 30, 2019: risk-free interest rate of 2.4%, dividend yield of 6.7%, volatility factors in the expected market price of the Company’s common shares of 19.1%, 0.75% expected forfeiture rate and an expected life of approximately six years. The Company uses historical data to estimate the expected life of the option and the risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. Additionally, expected volatility is computed based on the average historical volatility of the Company’s publicly traded shares.

The following table summarizes outstanding and exercisable options at September 30, 2019:

	Options outstanding						Options exercisable
Exercise price range	Options outstanding	Weighted avg. life remaining	Weighted avg. exercise price		Aggregate intrinsic value (in thousands)		Options outstanding	Weighted avg. life remaining	Weighted avg. exercise price		Aggregate intrinsic value (in thousands)
$ 44.62 - 49.99	31,445	2.3					31,445	2.3
50.00 - 59.99	31,710	4.8					28,834	4.4
60.00 - 69.99	50,719	5.4					50,719	5.4
70.00 - 76.63	4,156	8.3					1,108	7.4
	118,030	4.5	$	55.63	$	2,505	112,106	4.3	$	55.08	$	2,442

Nonvested Shares

A summary of the Company’s nonvested share activity and related information is as follows:

	Number of shares		Weighted avg. grant date fair value		Weighted avg. life remaining
Outstanding at December 31, 2018	655,056		$	64.16
Granted	208,755		74.13
Vested	(346,145	)	64.66
Forfeited	(8,328	)	66.38
Outstanding at September 30, 2019	509,338		$	67.88	1.11

The holders of nonvested shares have voting rights and receive dividends from the date of grant. The fair value of the nonvested shares that vested was $22.7 million (including $4.9 million related to the severance of the Company's former Senior Vice President and Chief Investment Officer as well as other employees) and $16.0 million for the nine months ended September 30, 2019 and 2018, respectively. At September 30, 2019, unamortized share-based compensation expense related to nonvested shares was $18.2 million.

Restricted Share Units

A summary of the Company’s restricted share unit activity and related information is as follows:

	Number of shares		Weighted avg. grant date fair value		Weighted avg. life remaining
Outstanding at December 31, 2018	23,571		$	61.25
Granted	27,392		77.19
Vested	(24,727	)	61.62
Outstanding at September 30, 2019	26,236		$	77.54	0.67

The holders of restricted share units receive dividend equivalents from the date of grant. At September 30, 2019, unamortized share-based compensation expense related to restricted share units was $1.4 million.