SHARE-BASED COMPENSATION

12 Months Ended

Dec. 31, 2020

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, 2020, there were 470,502 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 2020, 2019 or 2018. As of December 31, 2020, 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, 2020, the Company has 258,753 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 2020, 2019 and 2018, compensation expense related to these grants was approximately $3.3 million, $3.4 million, and $6.2 million, respectively. The total income tax (deficiency) benefit related to these grants was approximately $(161,000), $113,000 and $818,000 in 2020, 2019 and 2018, respectively. Approximately $222,000 of the compensation expense recorded for the year ending December 31, 2020 for restricted stock awards was related to performance-based restricted stock that was not yet granted as of December 31, 2020, and was therefore recorded in other liabilities rather than in shareholders' equity on the Company's consolidated balance sheet as of December 31, 2020.

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 2020, 2019 and 2018. The total income tax benefit related to stock options was approximately $93,000, $0 and $24,000 in 2020, 2019 and 2018, 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, 2020 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	387,193	$	26.51				—	$	—


Exercised	(107,498)	22.26			$	1,128	—	—			$	—

Under option, end of year	279,695	$	28.13	1.26	$	2,780	—	$	—	0	$	—
Exercisable at end of year	279,695	$	28.13	1.26	$	2,780	—	$	—	0	$	—

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

Options assumed pursuant to acquisition of Fidelity	576,588	26.62					—	—
Exercised	(189,395)	26.85			$	2,437	(7,711)	6.94			$	229

Under option, end of year	387,193	$	26.51	1.91	$	6,208	—	$	—	0	$	—
Exercisable at end of year	387,193	$	26.51	1.91	$	6,208	—	$	—	0	$	—

A summary of the status of the Company’s restricted stock awards as of and for the years ended December 31, 2020, and 2019 is presented below.


	2020			2019
	Shares	Weighted Average Grant Date Fair Value		Shares	Weighted Average Grant Date Fair Value
Nonvested shares at beginning of year	182,401	$	44.04	161,746	$	43.40
Granted	164,476	25.17		125,022	39.35
Vested	(75,874)	40.94		(63,072)	32.52
Forfeited	(12,250)	38.99		(41,295)	44.93
Nonvested shares at end of year	258,753	33.21		182,401	44.04

The balance of unearned compensation related to restricted stock grants as of December 31, 2020, 2019 and 2018 was approximately $3.9 million, $3.7 million, and $3.3 million, respectively. At December 31, 2020, the cost is expected to be recognized over a weighted-average period of 1.1 years.

During 2020, the Company issued 38,401 performance stock units ("PSUs") with a weighted average grant date fair value of $25.55 subject to a performance condition tied to tangible book value growth over a three-year period. The Company also granted 38,391 PSUs subject to a three-year performance metric of return on tangible common equity relative to a market index with a potential modifier subject to a total shareholder return ("TSR") performance metric with a weighted average grant date fair value of $24.83. The fair value of the PSUs subject to TSR at the grant date was determined using a Monte Carlo simulation method. The Company communicates threshold, target and maximum performance PSUs and performance targets to the applicable employees at the beginning of the performance periods. Dividends are not paid in respect of the awards during the performance period, although dividend equivalents do accrue over the life of the award and will vest, if at all, at the same time as the PSUs to which they relate. The number of PSUs that ultimately vest at the end of the three-year performance period, if any, will be based on the Company's performance relative to the applicable performance metrics. In 2020, the Company recognized compensation cost related to these grants of approximately $630,000. The balance of unearned compensation related to PSU grants as of December 31, 2020 was approximately $1.3 million.

A summary of the Company's nonvested PSUs for the year ended December 31, 2020 is presented below:


	2020
	Shares	Weighted Average Grant Date Fair Value
Nonvested units at beginning of year	—	$	—
Granted	76,792	25.19


Nonvested units at end of year	76,792	25.19