Note 9 — Equity Compensation

Our performance-based restricted stock awards and time-vested restricted stock awards are valued as liability awards, in accordance with fair value guidelines. We allow employees to elect to have taxes in excess of the minimum statutory requirements withheld from their awards and, therefore, the awards are classified as liability instruments under the ASC guidance on share based payment. Awards treated as liability instruments must be revalued each period until settled, and cost is accrued over the requisite service period and adjusted to fair value at each reporting period until settlement or expiration of the award. Grants were made in the first quarter of 2015 (the effect of which is included in the table below) but did not have a material impact on our results of operations. We had unrecognized compensation expense of $0.5 million as of September 30, 2015 which will be recognized over the remaining requisite service period.

We recognized the following amounts in compensation expense and tax benefits for all of our stock-based awards and programs for the applicable periods ended September 30 (in thousands):

	Three Months Ended				Nine Months Ended				Twelve Months Ended
	2015		2014		2015		2014		2015		2014
Compensation Expense	$	598	$	504	$	1,659	$	2,372	$	2,976	$	2,875

Tax Benefit Recognized	213		180		592		870		1,081		1,050

Time-Vested Restricted Stock Awards

Our time-vested restricted stock awards vest after a three-year period. No dividend rights accumulate during the vesting period. Time-vested restricted stock is valued at an amount equal to the fair market value of our common stock on the date of grant. If employment terminates during the vesting period because of death, retirement, or disability, the participant is entitled to a pro-rata portion of the time-vested restricted stock awards such participant would otherwise have earned, which is distributed six months following the date of termination, with the remainder of the award forfeited. If employment is terminated during the vesting period for reasons other than those listed above, the time-vested restricted stock awards will be forfeited on the date of the termination, unless the Board of Directors Compensation Committee determines, in its sole discretion, that the participant is entitled to a pro-rata portion of the award.

A summary of time-vested restricted stock activity under the plan for 2014 and 2015 is presented in the table below:

	2015				2014
			Weighted				Weighted
	Number of		Average Grant		Number of		Average Grant
	shares		Date Fair Value		shares		Date Fair Value
Outstanding at January 1,	41,000		$	21.89	24,900		$	22.68
Granted	19,000		30.40		22,600		22.40
Distributed	(1,654	)	21.92		(4,010	)	22.98
Forfeited shares	(2,746	)	25.91		(2,490	)	—

Outstanding at September 30	55,600		$	24.60	41,000		$	24.15

Performance-Based Restricted Stock Awards

Performance-based restricted stock awards consisting of the right to receive a number of shares of common stock at the end of the restricted period (assuming performance criteria are met) are granted to qualified individuals. We estimate the fair value of outstanding restricted stock awards using a Monte Carlo option valuation model.

Non-vested performance-based restricted stock awards (based on target number) as of September 30, 2015 and 2014 and changes during the nine months ended September 30, 2015 and 2014 were as follows:

	2015				2014
			Weighted				Weighted
	Number of		Average Grant		Number of		Average Grant
	shares		Date Fair Value		shares		Date Fair Value
Outstanding at January 1,	63,300		$	21.74	47,200		$	21.39
Target shares granted	21,800		$	30.40	27,000		$	22.40
Shares issued in excess of target	3,653		$	30.55	—		—
Shares awarded	(13,653	)	$	30.55	—		—
Forfeited shares	(6,079	)	$	24.10	—		—
Target shares not awarded	0		$	0	(10,900	)	$	21.84

Granted, nonvested at September 30,	69,021		$	24.36	63,300		$	21.74

Employee Stock Purchase Plan

Our Employee Stock Purchase Plan (ESPP) permits the grant to eligible employees of options to purchase common stock at 90% of the lower of market value at date of grant or at date of exercise. The lookback feature of this plan is valued at 90% of the Black-Scholes methodology plus 10% of the maximum subscription price. As of September 30, 2015, there were 764,645 shares available for issuance in this plan.

	2015		2014
Subscriptions outstanding at September 30	59,463		57,915
Maximum subscription price(1)	$	21.43	$	21.43
Shares of stock issued	56,193		56,942
Stock issuance price	$	21.01	$	19.58

(1)

Stock will be issued on the closing date of the purchase period, which runs from June 1, 2015 to May 31, 2016.

Assumptions for valuation of these shares are shown in the table below.

	2015			2014
Fair value of grants at September 30	$	3.58		$	3.07
Risk-free interest rate	0.26		%	0.10		%
Expected dividend yield	4.40		%	4.30		%
Expected volatility	21.00		%	14.00		%
Expected life in months	12			12
Grant Date	6/1/15			6/2/14