8. Share Based Compensation

We maintain share based payment plans that include a non-employee director stock purchase plan and a long-term incentive plan that permits the issuance of share based compensation, including stock options and non-vested share awards. The long-term incentive plan, which is shareholder approved, permits the grant of additional share based awards for up to 0.5 million shares of common stock as of September 30, 2018. The non-employee director stock purchase plan permits the issuance of additional share based payments for up to 0.2 million shares of common stock as of September 30, 2018. Share based awards and payments are measured at fair value at the date of grant and are expensed over the requisite service period. Common shares issued upon exercise of stock options come from currently authorized but unissued shares.

During the nine month periods ended September 30, 2018 and 2017, pursuant to our long-term incentive plan, we granted 0.05 million shares of restricted stock during each period, and 0.02 million performance stock units (“PSU”), during each period to certain officers. No long term incentive grants were made during the three months ended September 30, 2018 and 2017. Except for 0.002 million shares of restricted stock issued in 2018 that vest ratably over three years, the shares of restricted stock and PSUs cliff vest after a period of three years. The performance feature of the PSUs is based on a comparison of our total shareholder return over the three year period starting on the grant date to the total shareholder return over that period for a banking index of our peers.

Our directors may elect to receive a portion of their quarterly cash retainer fees in the form of common stock (either on a current basis or on a deferred basis pursuant to the non-employee director stock purchase plan referenced above). Shares equal in value to that portion of each director’s fees that he or she has elected to receive in stock are issued each quarter and vest immediately. We issued 0.007 million shares and 0.006 million shares during the nine months ended September 30, 2018 and 2017, respectively, and expensed their value during those same periods.

Total compensation expense recognized for grants pursuant to our long-term incentive plan was $0.4 million and $1.1 million during the three and nine month periods ended September 30, 2018, respectively, and was $0.4 million and $1.2 million during the same periods in 2017, respectively. The corresponding tax benefit relating to this expense was $0.1 million and $0.2 million for the three and nine month periods ended September 30, 2018, respectively and $0.1 million and $0.4 million for the same periods in 2017. Total expense recognized for non-employee director share based payments was $0.05 million and $0.16 million during the three and nine month periods ended September 30, 2018, respectively, and was $0.05 million and $0.12 million during the same periods in 2017, respectively. The corresponding tax benefit relating to this expense was $0.01 million and $0.03 million for the three and nine month periods ended September 30, 2018, respectively and $0.02 million and $0.04 million during the same periods in 2017.

At September 30, 2018, the total expected compensation cost related to non-vested restricted stock and PSUs not yet recognized was $2.4 million. The weighted-average period over which this amount will be recognized is 2.0 years.

A summary of outstanding stock option grants and related transactions follows:

	Number of Shares			Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregated Intrinsic Value
								(In thousands)
Outstanding at January 1, 2018		176,055		$	5.24
Issued for acquisition (see note #16)		187,915			9.94
Exercised		(113,548	)		9.18
Forfeited		-
Expired		-
Outstanding at September 30, 2018		250,422		$	6.98		4.7	$	4,174

Vested and expected to vest at September 30, 2018		250,422		$	6.98		4.7	$	4,174
Exercisable at September 30, 2018		250,422		$	6.98		4.7	$	4,174

A summary of outstanding non-vested restricted stock and PSUs and related transactions follows:

	Number of Shares			Weighted- Average Grant Date Fair Value
Outstanding at January 1, 2018		290,527		$	15.88
Granted		73,406			23.62
Vested		(96,255	)		13.17
Forfeited		(8,259	)		18.53
Outstanding at September 30, 2018		259,419		$	19.00

A summary of weighted-average assumptions used in the Black-Scholes option pricing model for the issue of stock options relating to the acquisition of TCSB (see note #16) during the second quarter of 2018 follows:

Expected dividend yield		2.62	%
Risk-free interest rate		2.40
Expected life (in years)		3.14
Expected volatility		45.99	%
Per share weighted-average fair value	$	13.25

The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. The expected life was obtained using a simplified method that, in general, averaged the vesting term and original contractual term of the stock option. This method was used as relevant historical data of actual exercise activity was very limited. The expected volatility was based on historical volatility of our common stock.

Certain information regarding options exercised during the periods follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
	(In thousands)
Intrinsic value	$	153	$	39	$	1,827	$	513
Cash proceeds received	$	58	$	18	$	1,042	$	117
Tax benefit realized	$	32	$	14	$	384	$	180