Stock-based Compensation

12 Months Ended

Dec. 31, 2019

NOTE I – STOCK-BASED COMPENSATION

On April 22, 2014, the stockholders of the Corporation approved the 2014 Equity Incentive Plan (“2014 Plan”). Upon approval of the 2014 Plan, no further awards could be made under the 2006 Stock Compensation Plan (“2006 Plan”).

2014 Plan. Under the 2014 Plan, awards may be granted to employees and non-employee directors as non-qualified stock options (“NQSOs”), stock appreciation rights (“SARs”), restricted stock awards, RSUs, or any combination thereof, any of which may be subject to performance-based vesting conditions. Awards may also be granted to employees as incentive stock options (“ISOs”). The exercise price of stock options and SARs granted under the 2014 Plan may not be less than the fair market value of the Corporation’s common stock on the date the stock option or SAR is granted. The 2014 Plan is administered by the Compensation Committee of the Board of Directors. Substantially all of the awards granted to date under the 2014 Plan are RSUs. All awards granted under the 2014 Plan will immediately vest upon an involuntary termination following a change in control, total and permanent disability, as defined, or death, and with certain exceptions, will immediately vest in the event of retirement, as defined.

The Corporation has 2,250,000 shares of common stock reserved for awards under the 2014 Plan. Awards granted under the 2006 Plan that expire or are forfeited after April 22, 2014 will be added to the number of shares of common stock reserved for issuance of awards under the 2014 Plan. All of the 2,250,000 shares may be issued pursuant to the exercise of stock options or SARs. A maximum of 787,500 shares may be issued as restricted stock awards or RSUs. At December 31, 2019, 1,701,441 equity awards remain available to be granted under the 2014 Plan of which 259,262 may be granted as restricted stock awards or RSUs.

Details of RSUs. The following table summarizes the vesting schedule of RSUs outstanding at December 31, 2019.



		Granted During the Year Ended December 31,
	Total	2019	2018	2017
Number of RSUs :
Granted	315,406	150,389	70,688	94,329
Outstanding at December 31, 2019	254,591	146,515	42,168	65,908

Vested and convertible at December 31, 2019	117,881	43,159	20,573	54,149
Scheduled to vest during:
2020	74,173	54,537	11,127	8,509
2021	39,650	25,932	10,468	3,250
2022	20,887	20,887	—	—
2023	1,000	1,000	—	—
2024	1,000	1,000	—	—
	254,591	146,515	42,168	65,908

The RSUs in the table above include performance-based RSUs with vesting based on the financial performance of the Corporation in 2019, 2020 and 2021 and service-based RSUs with various service-based vesting periods. The grant date fair value of RSUs is equal to the market price of the shares underlying the awards on the grant date, discounted for dividends that are not paid on these RSUs. The fair values of awards made in 2019, 2018 and 2017, as well as the assumptions utilized in determining such values, is presented below.



	2019
	Performance-Based			Service-Based
	Vesting			Vesting
Grant date fair value	$19.48	to	$22.00	$19.40	to	$22.00
Market price on grant date	$20.85	to	$22.71	$20.85	to	$22.71
Expected annual dividend	$0.68	to	$0.72	$0.68	to	$0.72
Expected term (in years)			2.0	2.0	to	5.0
Risk-free interest rate	1.43%	to	2.56%	1.43%	to	2.56%
	2018
Grant date fair value			$27.09	$27.09	to	$27.33
Market price on grant date			$28.25	$28.25	to	$28.50
Expected annual dividend			$0.60			$0.60
Expected term (in years)			2.0	2.0	to	3.0
Risk-free interest rate			2.02%	1.89%	to	2.02%
	2017
Grant date fair value			$26.27	$25.35	to	$26.00
Market price on grant date			$27.90	$27.50	to	$28.15
Expected annual dividend			$0.56			$0.56
Expected term (in years)			3.0	3.0	to	4.0
Risk-free interest rate			1.49%	1.60%	to	1.67%

In January 2020, 68,383 RSUs were awarded under the 2014 Plan, including 45,578 performance-based RSUs and 22,805 service-based RSUs.

The following table presents a summary of RSUs outstanding at December 31, 2019 and changes during the year then ended.



				Weighted-
			Weighted-	Average		Aggregate
			Average	Remaining		Intrinsic
	Number of		Grant-Date	Contractual		Value
	RSUs		Fair Value	Term (yrs.)		(in thousands)
Outstanding at January 1, 2019	215,084	$	23.79
Granted	150,389		20.12
Converted	(104,338)		20.83
Forfeited	(6,544)		22.52
Outstanding at December 31, 2019	254,591	$	22.87	0.74	$	6,385
Vested and Convertible at December 31, 2019	117,881	$	24.13	—	$	2,956

The performance-based RSUs granted in 2019 and 2018 have a maximum payout potential of 1.50 shares of the Corporation’s common stock for each RSU awarded. Performance-based RSUs granted in 2017 have a maximum payout potential of 1.25 shares for each RSU awarded. Based on the performance of 2019, an additional 2,670 shares were earned on the performance-based RSUs granted in 2019 and 2017. These shares are not reflected in the table above. All other RSUs outstanding at December 31, 2019 have a maximum payout potential of one share of the Corporation’s common stock for each RSU awarded.

The RSUs granted in the table above include 38,245 RSUs earned by retiring executives for 2019 service. RSUs outstanding at December 31, 2019 include 117,881 RSUs that were vested and convertible into common stock at year-end and 136,710 RSUs that are currently expected to vest and become convertible in the future. The total intrinsic value of RSUs converted in 2019, 2018 and 2017 was $2,174,000, $3,035,000 and $1,779,000, respectively.

2006 Plan. The 2006 Plan was approved by the stockholders of the Corporation on April 18, 2006. The 2006 Plan permitted the granting of stock options, SARs, restricted stock awards and RSUs to employees and non-employee directors. Under the terms of the 2006 Plan, stock options and SARs could not have an exercise price that was less than 100% of the fair market value of one share of the underlying common stock on the date of grant. Through December 31, 2011, equity grants to executive officers and directors under the 2006 Plan consisted of a combination of NQSOs and RSUs, while equity grants to other officers consisted solely of NQSOs. Beginning in 2012, equity grants under the 2006 Plan consisted solely of RSUs. Stock options granted under the 2006 Plan have a five year vesting period and a ten year term.

Fair Value of Stock Options. The grant date fair value of options was estimated on the date of grant using the Black-Scholes option pricing model. Substantially all outstanding stock options were expensed in prior years.

Stock Option Activity. The following table presents a summary of options outstanding at December 31, 2019 and changes during the year then ended.



				Weighted-
			Weighted-	Average		Aggregate
			Average	Remaining		Intrinsic
	Number of		Exercise	Contractual		Value
	Options		Price	Term (yrs.)		(in thousands)
Outstanding at January 1, 2019	96,112	$	11.80
Exercised	(40,766)		11.07
Outstanding at December 31, 2019	55,346	$	12.34	0.78	$	705
Exercisable at December 31, 2019	55,196	$	12.33	0.77	$	$704

All options outstanding at December 31, 2019 are either fully vested or expected to vest. The total intrinsic value of options exercised in 2019, 2018 and 2017 was $453,000, $900,000 and $1,833,000, respectively. Cash received from option exercises in 2019, 2018 and 2017, was $452,000, $312,000 and $917,000, respectively. Tax benefits from stock option exercises were $136,000, $271,000 and $767,000 in 2019, 2018 and 2017, respectively.

Compensation Expense. The Corporation recorded compensation expense for share-based payments of $3,050,000, $1,814,000 and $2,434,000 in 2019, 2018 and 2017, respectively, and related income tax benefits of $913,000, $547,000 and $1,019,000, respectively.

Unrecognized Compensation Cost. As of December 31, 2019, there was $893,000 of total unrecognized compensation cost related to non-vested equity awards comprised substantially of RSUs. The total cost is expected to be recognized over a weighted-average period of 1.55 years.

Other. No cash was used to settle stock options in 2019, 2018 or 2017. The Corporation uses newly issued shares to settle stock option exercises and for the conversion of RSUs. During 2019 and 2018, 5,884 and 2,747 shares, respectively, of the Corporation’s common stock were issued to members of the Board of Directors in payment of director fees.