Stock-Based Compensation Plans

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

Stock-based compensation plans

NOTE 15 – STOCK-BASED COMPENSATION PLANS

The following table presents compensation expense and related tax benefits for all equity awards recognized in the consolidated statements of income:

	2019			2018			2017
	(in thousands)
Compensation expense	$	7,413		$	7,965		$	5,209
Tax benefit	(1,610		)	(2,625		)	(3,994		)
Total stock-based compensation, net of tax	$	5,803		$	5,340		$	1,215

The tax benefits as a percentage of compensation expense, as shown in the preceding table, were 21.7%, 33.0% and 76.7% in 2019, 2018 and 2017, respectively. These percentages differ from the Corporation’s statutory tax rates of 21% for 2019 and 2018 and 35% for 2017 ("Tax Rates"). Tax benefits are only recognized over the vesting period for awards that ordinarily will generate a tax deduction when exercised, in the case of non-qualified stock options, or upon vesting, in the case of restricted stock, RSUs and PSUs. Tax benefits in excess of the Tax Rates resulted from incentive stock option exercises that triggered a tax deduction when they were exercised, and excess tax benefits realized on vesting RSUs and PSUs during the period.

The following table presents compensation expense and related tax benefits for restricted stock awards, RSUs and PSUs recognized in the consolidated statements of income, and included as a component of total stock-based compensation in the preceding table:

	2019			2018			2017
	(in thousands)
Compensation expense	$	6,621		$	7,124		$	4,922
Tax benefit	(1,509		)	(1,585		)	(1,559		)
Stock-based compensation, net of tax	$	5,112		$	5,539		$	3,363

The following table provides information about stock option activity for the year ended December 31, 2019:

	Stock Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (in millions)
Outstanding and exercisable as of December 31, 2018	658,768		$	10.75
Exercised	(150,296	)	9.73
Forfeited	(4,128	)	11.31
Expired	(4,084	)	5.27
Outstanding and exercisable as of December 31, 2019	500,260		$	11.12	3.1 years	$	3.2

The following table provides information about nonvested restricted stock, RSUs and PSUs granted under the Employee Equity Plan and Directors' Plan for the year ended December 31, 2019:

	Restricted Stock/RSUs/PSUs(1)
	Shares		Weighted Average Grant Date Fair Value
Nonvested as of December 31, 2018	1,368,493		$	15.49
Granted	454,951		15.51
Vested	(407,872	)	12.38
Forfeited	(43,236	)	16.61
Nonvested as of December 31, 2019	1,372,336		$	16.39

(1) There were no nonvested stock options at December 31, 2019 or 2018.

As of December 31, 2019, there was $10.1 million of total unrecognized compensation cost (pre-tax) related to restricted stock, RSUs and PSUs that will be recognized as compensation expense over a weighted average period of two years. As of December 31, 2019, the Employee Equity Plan had 10.1 million shares reserved for future grants through 2023, and the Directors’ Plan had 260,000 shares reserved for future grants through 2021.

The following table presents information about stock options exercised:

	2019		2018		2017
	(dollars in thousands)
Number of options exercised	150,296		214,845		411,292
Total intrinsic value of options exercised	$	1,028	$	1,616	$	2,955
Cash received from options exercised	$	1,446	$	2,210	$	4,644
Tax benefit from options exercised	$	188	$	291	$	989

Upon exercise, the Corporation issues shares from its authorized, but unissued, common stock to satisfy the options.

The fair value of certain PSUs with market-based performance conditions granted under the Employee Equity Plan was estimated on the grant date using the Monte Carlo valuation methodology performed by a third-party valuation expert. This valuation is dependent upon certain assumptions, as summarized in the following table:

	2019		2018		2017
Risk-free interest rate	2.27	%	2.63	%	1.43	%
Volatility of Corporation’s stock	23.00	%	23.50	%	22.45	%
Expected life of PSUs	3 Years		3 Years		3 Years

The expected life of the PSUs with fair values measured using the Monte Carlo valuation methodology was based on the defined performance period of three years. Volatility of the Corporation’s stock was based on historical volatility for the period commensurate with the expected life of the PSUs. The risk-free interest rate is the zero-coupon U.S. Treasury rate commensurate with the expected life of the PSUs on the date of the grant. Based on the assumptions above, the Corporation calculated an estimated fair value per PSU with market-based performance conditions granted in 2019, 2018 and 2017 of $16.83, $12.92 and $17.25, respectively.

Under the ESPP, eligible employees can purchase stock of the Corporation at 85% of the fair market value of the stock on the date of purchase. The ESPP is considered to be a compensatory plan and, as such, compensation expense is recognized for the 15% discount on shares purchased. The following table summarizes activity under the ESPP:

	2019		2018		2017
ESPP shares purchased	136,576		110,200		98,000
Average purchase price per share (85% of market value)	$	14.03	$	14.74	$	15.28
Compensation expense recognized (in thousands)	$	338	$	287	$	261