The Company's stock based plans include the Second Amended and Restated 2005 Employee Stock Plan (“2005 Plan”) and the 2010 Nonemployee Director Stock Plan (“2010 Plan”) both of which have been approved by the Company’s Board of Directors and shareholders. The Company may award shares from these plans as either stock options or restricted stock from its pool of authorized but unissued shares.

The following table presents the amount of cumulatively granted stock options and restricted stock awards, net of forfeitures, through December 31, 2017:



	Authorized Awards	Cumulative Granted, Net of Forfeitures		Total	Authorized but Unissued
		Stock Option Awards	Restricted Stock Awards
		Stock Option Awards	Restricted Stock Awards
2005 Plan	1,650,000	537,941	695,546	1,233,487	416,513
2010 Plan	314,600	42,000	93,245	135,245	179,355

The following table presents the pre-tax expense associated with stock option and restricted stock awards and the related tax benefits recognized for the years presented:



	Years Ended December 31
	2017		2016		2015
	(Dollars in thousands)
Stock based compensation expense
Restricted stock awards(1)	$	2,730	$	2,590	$	2,296
Directors’ fee expense
Stock options	76		72		—
Restricted stock awards	527		303		194
Total stock based award expense	$	3,333	$	2,965	$	2,490
Related tax benefits recognized in earnings	$	1,362	$	1,211	$	1,122


(1)	Inclusive of compensation expense associated with time-vested and performance-based restricted stock awards.

Expense related to awards issued to directors are recognized as directors’ fees within other noninterest expense.

The Company has standard form agreements used for stock option and restricted stock awards. The standard form agreements used for the Chief Executive Officer and all other Executive Officers have previously been disclosed in Securities and Exchange Commission filings and generally provide that: (1) any unvested options or unvested restricted stock vest upon a Change of Control; and, that (2) any stock options which vest pursuant to a Change of Control, which is an event described in Section 280G of the Internal Revenue Code of 1986, will be cashed out at the difference between the acquisition price and the exercise price of the stock option.

Stock Options

The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model with the following assumptions used for grants under the identified plans:


•	Expected volatility is based on the standard deviation of the historical volatility of the weekly adjusted closing price of the Company’s shares for a period equivalent to the expected life of the option.


•	Expected life represents the period of time that the option is expected to be outstanding, taking into account the contractual term, historical exercise/forfeiture behavior, and the vesting period, if any.


•	Expected dividend yield is an annualized rate calculated using the most recent dividend payment at time of grant and the Company’s average trailing twelve-month daily closing stock price.


•	The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for a period equivalent to the expected life of the option.

•

Prior to January 1, 2017, the stock based compensation expense recognized in earnings was based on the amount of awards ultimately expected to vest, therefore a forfeiture assumption was estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differed from those estimates. Stock based compensation expense recognized was reduced for annualized estimated forfeitures of 4.5% in both 2016 and 2015 based on historical experience. Effective January 1, 2017, the Company adopted new accounting guidance and elected to no longer estimate forfeitures on stock compensation and instead recognize forfeitures when they occur. The election required a cumulative effect adjustment to retained earnings which did not materially impact the Company's consolidated financial position.

The Company made the following awards of nonqualified options to purchase shares of common stock in 2017 and 2016. There were no such awards made in 2015.



	Years Ended December 31
	2017			2016
Date of grant	11/7/2017			7/14/2016			2/20/2016
Plan	2010			2010			2010
Options granted	5,000			5,000			5,000
Vesting period (beginning on the grant date)	14 months			18 months			22 months
Expiration date	11/7/2027			7/14/2026			2/20/2026
Expected volatility	20.80		%	32.28		%	32.44		%
Expected life (years)	5.5			5.5			5.5
Expected dividend yield	1.87		%	2.37		%	2.28		%
Risk free interest rate	2.02		%	1.14		%	1.29		%
Fair value per option	$	12.43		$	11.46		$	10.59

Under all of the Company’s stock based plans, the option exercise price is based upon the average of the high and low trading value of the stock on the date of grant. Stock option awards granted to date under all plans expire through 2027.

The following table presents relevant information relating to the Company’s stock options for the periods indicated:



	Years Ended December 31
	2017		2016		2015
	(Dollars in thousands, except per share data)
Fair value of stock options vested based on grant date fair value	$	72	$	37	$	14
Intrinsic value of stock options exercised	$	1,082	$	494	$	3,362
Cash received from stock option exercises	$	918	$	680	$	6,105
Tax benefit realized on stock option exercises/repurchase	$	442	$	204	$	1,362
Weighted average grant date fair value of options granted (per share)	$	12.43	$	11.03	$	—

A summary of stock option activity of the Company’s Stock Option Grants for the year ended December 31, 2017 is presented in the table below:



	Outstanding								Nonvested
	Stock Option Awards			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (1)		Stock Option Awards		Weighted Average Grant Date Fair Value
	(Dollars in thousands, except per share data)
Balance at January 1, 2017	109,650			$	29.93				6,666		$	11.03
Granted	5,000			70.28					5,000		12.43
Exercised	(30,150	)		30.43					—		—
Vested	n/a			n/a					(6,667	)	10.85
Forfeited	—			—					—		—
Expired	(500	)		28.88					—		—
Balance at December 31, 2017	84,000		(2)	$	32.16	3.04 years	$	3,258	4,999		$	12.11
Options outstanding and expected to vest at December 31, 2017	84,000		(3)	$	32.16	3.04 years	$	3,258
Options exercisable at December 31, 2017	79,001		(4)	$	30.21	2.64 years	$	3,218
Unrecognized compensation cost													$	22
Weighted average remaining recognition period (years)													1.00


(1)	The aggregate intrinsic value in the preceding tables represents the total pre-tax intrinsic value, based on the average of the high price and low price at which the Company’s common stock traded on December 31, 2017 of $70.95, which would have been received by the option holders had they all exercised their options as of that date.


(2)	Inclusive of 38,000 stock options outstanding to Directors.

(3) Inclusive of 38,000 vested stock options and expected to vest to Directors.

(4) Inclusive of 33,001 vested stock options outstanding to Directors.

Restricted Stock

The Company grants both time-vested restricted stock awards as well as performance-based restricted stock awards. During the years ended December 31, 2017, 2016, and 2015 the Company has made the following restricted stock award grants:



	Shares Granted		Plan	Fair Value (1)		Vesting Period
Time-vested
2017
2/13/2017	1,200	1,200	2005	$	62.53	Ratably over 5 years from grant date
2/16/2017	34,150	34,150	2005	$	63.10	Ratably over 5 years from grant date
3/31/2017	500	500	2005	$	65.63	Ratably over 5 years from grant date
4/3/2017	1,500	1,500	2005	$	64.14	Once on November 30, 2017 (2)
5/15/2017	1,000	1,000	2005	$	64.03	Ratably over 5 years from grant date
5/23/2017	7,000	7,000	2010	$	61.95	At the end of 5 years from grant date (3)
6/15/2017	950	950	2005	$	66.18	Ratably over 5 years from grant date

2016
2/11/2016	51,475		2005	$	41.96	Ratably over 5 years from grant date
3/1/2016	600		2005	$	44.37	Ratably over 5 years from grant date
5/24/2016	8,700		2010	$	48.34	At the end of 5 years from grant date (3)
9/19/2016	800		2005	$	52.92	Ratably over 5 years from grant date
11/7/2016	500		2005	$	54.28	Ratably over 5 years from grant date
11/14/2016	725		2010	$	63.43	Once on May 24, 2021 (4)
2015
2/11/2015	31,500		2005	$	39.42	Ratably over 5 years from grant date
2/12/2015	25,910		2005	$	40.03	Ratably over 5 years from grant date
3/19/2015	3,800		2005	$	43.56	Ratably over 5 years from grant date
4/27/2015	625		2005	$	41.61	At the end of 3 years from grant date
4/27/2015	1,875		2005	$	41.61	At the end of 5 years from grant date
5/27/2015	8,800		2010	$	45.02	At the end of 5 years from grant date (3)
7/14/2015	800		2010	$	47.82	Once on May 27, 2020 (5)
10/13/2015	1,000		2005	$	46.09	Ratably over 5 years from grant date
10/20/2015	2,000		2005	$	46.47	Ratably over 5 years from grant date

Performance-based
2/16/2017	14,400		2005	$	63.10	The earlier of: the date on which it is determined if the performance goal has been achieved; or, March 31, 2020.
2/11/2016	20,450		2005	$	41.96	The earlier of: the date on which it is determined if the performance goal has been achieved; or, March 31, 2019.
2/12/2015	21,780		2005	$	40.03	The earlier of: the date on which it is determined if the performance goal has been achieved; or, March 31, 2018.

(1)

The fair value of the restricted stock awards are based upon the average of the high and low prices at which the Company’s common stock traded on the date of grant. The holders of time-vested restricted stock awards participate fully in the rewards of stock ownership of the Company, including voting and dividend rights. The holders of performance-based restricted stock awards do not participate in the rewards of stock ownership of the Company until vested. The holders of all restricted stock awards are not required to pay any consideration to the Company for the awards.


(2)	This restricted stock grant fully vested upon an employee's termination, on November 30, 2017.


(3)	These restricted stock grants will vest at the end of a five year period, or earlier if the director ceases to be a director for any reason other than cause, such as, for example, by retirement.


(4)	These restricted stock grants will vest on May 24, 2021, or earlier if the director ceases to be a director for any reason other than cause, such as, for example, by retirement.


(5)	These restricted stock grants will vest on May 27, 2020, or earlier if the director ceases to be a director for any reason other than cause, such as, for example, by retirement.

The following table presents the fair value of restricted stock awards vesting during the periods presented:



	Years Ended December 31
	2017		2016		2015
	(Dollars in thousands)
Fair value of restricted stock awards upon vesting	$	5,717	$	3,019	$	2,610

A summary of the status of the Company’s Restricted Stock Award Grants for the year ended December 31, 2017 is presented in the table below:



	Outstanding Restricted Stock Awards			Weighted Average Grant Price ($)
	(Dollars in thousands, except per share data)
Balance at January 1, 2017	264,315			$	38.88
Granted	60,700			63.07
Vested/released	(89,436	)		36.79
Forfeited	(9,614	)		39.49
Balance at December 31, 2017	225,965		(1)	$	46.18
Unrecognized compensation cost (inclusive of directors’ fees)						$	6,355
Weighted average remaining recognition period (years)						3.00


(1)	Inclusive of 38,445 restricted stock awards outstanding to Directors.