SHARE-BASED COMPENSATION

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

The Company awards its employees and directors various forms of share-based incentives under certain plans approved by its shareholders. Awards granted under the plans may be in the form of qualified or nonqualified stock options, restricted stock, stock appreciation rights (“SARs”), long-term incentive compensation units consisting of cash and common stock, or any combination thereof within the limitations set forth in the plans. The plans provide that the aggregate number of shares of the Company’s common stock which may be subject to award may not exceed 1,200,000 subject to adjustment in certain circumstances to prevent dilution. At December 31, 2019, there were 699,992 shares available to be issued under the plans.

All stock options have an exercise price that is equal to the closing fair market value of the Company’s stock on the date the options were granted. Options granted under the plans generally vest over a five-year period and have a 10-year maximum term. Most options granted since 2005 contain performance-based vesting conditions.

The Company did not grant any options during 2019, 2018 or 2017. As of December 31, 2019, there was no unrecognized compensation cost related to nonvested share-based compensation arrangements granted related to performance or non-performance-based options. During 2019, the Company assumed 576,588 fully vested options in the Fidelity acquisition.

As of December 31, 2019, the Company has 182,401 outstanding restricted shares granted under the plans as compensation to certain employees and directors. These shares carry dividend and voting rights. Sales of these shares are restricted prior to the date of vesting, which is one to five years from the date of the grant. Shares issued under the plans are recorded at their fair market value on the date of their grant. The compensation expense is recognized on a straight-line basis over the related vesting period. In 2019, 2018 and 2017, compensation expense related to these grants was approximately $3.4 million, $6.2 million, and $3.3 million, respectively. The total income tax benefit related to these grants was approximately $113,000, $818,000 and $698,000 in 2019, 2018 and 2017, respectively. Approximately $460,000 of the compensation expense recorded for the year ending December 31, 2019 for restricted stock awards was related to performance-based restricted stock that was not yet

granted as of December 31, 2019, and was therefore recorded in other liabilities rather than in shareholders' equity on the Company's consolidated balance sheet as of December 31, 2019.

It is the Company’s policy to issue new shares for stock option exercises and restricted stock rather than issue treasury shares. The Company recognizes share-based compensation expense on a straight-line basis over the options’ related vesting term. The Company did not record any share-based compensation expense related to stock options during 2019, 2018 and 2017. The total income tax benefit related to stock options was approximately $0, $24,000 and $248,000 in 2019, 2018 and 2017, respectively.

The fair value of each share-based compensation grant is estimated on the date of grant using the Black-Scholes option-pricing model.

A summary of the activity of non-performance-based and performance-based options as of December 31, 2019 is presented below.


	Non-Performance-Based										Performance-Based
	Shares	Weighted Average Exercise Price		Weighted Average Contractual Term	Aggregate Intrinsic Value $ (000)		Shares	Weighted Average Exercise Price		Weighted Average Contractual Term	Aggregate Intrinsic Value $ (000)
Under option, beginning of year	—	$	—				7,711	$	6.94
Granted	—	—					—	—
Options assumed pursuant to acquisition of Fidelity	576,588	26.62					—	—
Exercised	(189,395)	26.85			$	2,437	(7,711)	6.94			$	229
Forfeited	—	—					—	—
Under option, end of year	387,193	$	26.51	1.91	$	6,208	—	$	—	—	$	—
Exercisable at end of year	387,193	$	26.51	1.91	$	6,208	—	$	—	—	$	—

A summary of the activity of non-performance-based and performance-based options as of December 31, 2018 is presented below.


	Non-Performance-Based										Performance-Based
	Shares	Weighted Average Exercise Price		Weighted Average Contractual Term	Aggregate Intrinsic Value $ (000)		Shares	Weighted Average Exercise Price		Weighted Average Contractual Term	Aggregate Intrinsic Value $ (000)
Under option, beginning of year	47,294	$	14.76				37,013	$	7.36
Granted	—	—					—	—
Exercised	(47,294)	14.76			$	653	(29,014)	7.47			$	217
Forfeited	—	—					(288)	7.47
Under option, end of year	—	$	—	—	$	—	7,711	$	6.94	0.11	$	308
Exercisable at end of year	—	$	—	—	$	—	7,711	$	6.94	0.11	$	308

A summary of the status of the Company’s restricted stock awards as of and for the years ended December 31, 2019, and 2018 is presented below.


	2019				2018
	Shares	Weighted Average Grant Date Fair Value		Shares	Weighted Average Grant Date Fair Value
Nonvested shares at beginning of year	161,746	$	43.40	277,815	$	33.24
Granted	125,022	39.35		89,855	53.37
Vested	(63,072)	32.52		(195,344)	33.21
Forfeited	(41,295)	44.93		(10,580)	49.52
Nonvested shares at end of year	182,401	44.04		161,746	43.40

The balance of unearned compensation related to restricted stock grants as of December 31, 2019, 2018 and 2017 was approximately $3.7 million, $3.3 million, and $4.5 million, respectively. At December 31, 2019, the cost is expected to be recognized over a weighted-average period of 1.4 years.