Employee Benefits and Stock Compensation

12 Months Ended

Dec. 31, 2017

Compensation and Retirement Disclosure [Abstract]

Employee Benefits and Stock Compensation

Note J - Employee Benefits and Stock Compensation

The Company’s defined contribution plan covers substantially all employees after one year of service and includes a matching benefit for employees who can elect to defer a portion of their compensation. In addition, amounts of compensation contributed by employees are matched on a percentage basis under the plan. The defined contribution plan contributions charged to operations were $1.9 million in 2017, $1.7 million in 2016, and $1.5 million in 2015.

The Company, through its Compensation and Governance Committee of the Board of Directors (the “Compensation Committee”), offers equity compensation to employees and non-employee directors of Seacoast and Seacoast Bank in the form of various share-based awards, including stock options, restricted stock awards (“RSAs”), or restricted stock units (“RSUs”). The awards may vest over time, have certain performance based criteria, or both.

Stock options are granted with an exercise price at least equal to the market price of the Company’s stock at the date of grant. The fair value of options granted is estimated on the date of grant using the Black-Scholes option-pricing model. Compensation cost is amortized on a straight-line basis over the vesting period. Vesting is determined by the Compensation Committee at the time of grant, generally over five years. The options have a maximum term of ten years.

The fair value of RSAs and RSUs are estimated based on the price of the Company’s common stock on the date of grant. Compensation cost is measured straight-line for RSAs and ratably for RSUs over the vesting period of the awards and reversed for awards which are forfeited due to unfulfilled service or performance criteria. To the extent the Company has treasury shares available, stock options exercised or stock grants awarded may be issued from treasury shares. If treasury shares are insufficient, the Company can issue new shares.

Vesting of share-based awards is immediately accelerated on death or disability of the recipient. The Compensation Committee may, at its discretion, accelerate vesting upon retirement (including a voluntary termination of employment at age 55) for those employees with five or more years of service with the Company, or upon the event of a change-in-control.

Awards are currently granted under the Seacoast 2013 Incentive Plan (“2013 Plan”), which shareholders approved on May 23, 2013 and amended on August 26, 2015 to increase the number of authorized shares for issuance thereunder to 3,000,000. The 2013 Plan expires on May 26, 2025. Approximately 591,000 shares remain available for issuance as of December 31, 2017.

The impact of share-based compensation on the Company’s financial results is presented below:

	For the Year Ended December 31,
(In thousands)	2017		2016		2015
Share-based compensation expense	$	5,267	$	4,154		2,859
Income tax benefit		(1,966)		(1,602)		(963)

The total unrecognized compensation cost and the weighted-average period over which unrecognized compensation cost is expected to be recognized related to non-vested share-based compensation arrangements at December 31, 2017 is presented below:

(In thousands)	Unrecognized Compensation Cost		Weighted- Average Period Remaining (Years)
Restricted stock awards	$	2,383		1.7
Restricted stock units		3,403		1.7
Stock options		1,374		2.4
Total	$	7,160		1.8

Restricted Stock Awards

RSAs were granted in 2017 to various employees and vest over time, generally three years. Compensation cost of RSAs is based on the market value of the Company’s common stock at the date of grant and is recognized over the required service period on a straight-line basis. The Company’s accounting policy is to recognize forfeitures as they occur.

A summary of the status of the Company’s non-vested RSUs as of December 31, 2017, and changes during the year then ended, is presented below:

(In thousands, except share and per share data)	Restricted Award Shares		Weighted- Average Grant- Date Fair Value
Non-vested at January 1, 2017		206,952	$	14.72
Granted		114,331		24.08
Forfeited/Cancelled		(8,733)		20.76
Vested		(99,574)		14.13
Non-vested at December 31, 2017		212,976		19.77

Information regarding restricted stock awards during each of the following years:

(In thousands, except share and per share data)	Year Ended December 31,
	2017		2016		2015
Shares granted		114,331		164,599		123,806
Weighted-average grant date fair value	$	24.08	$	16.03	$	15.03
Fair value of awards vested(1)	$	1,407	$	1,981	$	836
(1) Based on grant date fair value

Restricted Stock Units

Certain RSUs granted in 2017 allow the grantee to earn 0%-200% of the target award based on either the Company’s adjusted earnings per share growth or its adjusted return on average tangible equity. In 2016, RSUs allowed the grantee to earn 0%-175% of the target award as determined by two criteria, the Company’s adjusted net income and its adjusted return on tangible equity. Both measure performance through December 31, 2019. If the Company does not achieve the target performance goal for either or both of the criteria being tracked, then the RSUs will not vest and will be forfeited.

A summary of the status of the Company’s non-vested RSUs as of December 31, 2017, and changes during the year then ended, is presented below:

(In thousands, except share and per share data)	Restricted Award Shares		Weighted- Average Grant- Date Fair Value
Non-vested at January 1, 2017		322,692	$	12.61
Granted		164,268		21.61
Forfeited/Cancelled		(22,113)		13.79
Vested		(88,880)		10.54
Non-vested at December 31, 2017		375,967		16.96

Information regarding restricted stock units during the following years:

(In thousands, except share and per share data)	For the Year Ended December 31,
	2017		2016		2015
Shares granted		164,268		136,188		127,128
Weighted-average grant date fair value	$	23.94	$	13.53	$	12.63
Fair value of awards vested(1)	$	937	$	846	$	-
(1) Based on grant date fair value

Stock Options

The Company estimated the fair value of each option grant on the date of grant using the Black-Scholes options-pricing model with the following weighted-average assumptions:

	For the Year Ended December 31,
	2017			2016			2015
Risk-free interest rates		1.85	%		1.63	%		1.65	%
Expected dividend yield		0	%		0	%		0	%
Expected volatility		25.4	%		21.9	%		15.5	%
Expected lives (years)		5.0			5.0			5.0

A summary of the Company’s stock options as of December 31, 2017, and changes during the year then ended, are presented below:

	Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (000s)
Outstanding at January 1, 2017		778,778	$	15.86
Granted		297,576		28.21
Exercised		(91,468)		11.77
Forfeited		(33,537)		96.17
Outstanding at December 31, 2017		951,349		17.29		6.86	$	8,493
Exercisable at December 31, 2017		517,100		12.09		5.85		6,787

Information related to stock options during each of the following years:

(In thousands, except share and per share data)	For the Year Ended December 31,
	2017		2016		2015
Options granted		297,576		243,391		63,650
Weighted-average grant date fair value	$	4.66	$	3.41	$	2.21
Intrinsic value of stock options exercised		1,143		80		-

The following table summarizes information related to stock options as of December 31, 2017:

Range of Exercise Prices	Options Outstanding		Remaining Contractual Life (Years)		Shares Exercisable		Weighted Average Exercise Price
$10.54 to $10.78		330,000		5.8		330,000	$	10.67
$10.97 to $15.99		323,773		5.8		163,538		13.42
$22.65 to $28.69		297,576		9.2		23,562		22.65
Total		951,349		6.9		517,100	$	12.09

Employee Stock Purchase Plan

The Employee Stock Purchase Plan (“ESPP”), as amended, was approved by shareholders on April 25, 1989, and additional shares were authorized for issuance by shareholders on June 18, 2009 and May 2, 2013. Under the ESPP, the Company is authorized to issue up to 300,000 common shares of the Company’s common stock to eligible employees of the Company.  These shares may be purchased by employees at a price equal to 95% of the fair market value of the shares on the purchase date.  Purchases under the ESPP are made monthly.  Employee contributions to the ESPP are made through payroll deductions.

	2017		2016		2015
ESPP shares purchased		12,434		10,483		9,083
Weighted-average employee purchase price	$	22.67	$	16.02	$	13.99