STOCK BASED COMPENSATION

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

The Company's stock based plans include the Second Amended and Restated 2005 Employee Stock Plan (the "2005 Plan") and the 2018 Non-Employee Director Stock Plan (the "2018 Plan"), which have been approved by the Company’s Board of Directors and shareholders. Up to 300,000 shares of the Company's common stock were authorized for issuance under the 2018 plan, which amount includes the 174,855 shares of common stock transferred from the 2010 Non-Employee Director Stock Plan (the "2010 Plan"), which shares were authorized but unissued when the 2010 Plan expired in May 2018. These shares may be awarded as either stock option awards or restricted stock awards from its pool of authorized but unissued shares.

The following table presents the amount of cumulatively granted stock option awards and restricted stock awards, net of forfeitures and expirations, granted through December 31, 2021:


	Authorized Awards	Cumulatively Granted, Net of Forfeitures and Expirations		Total	Authorized but Unissued
		Stock Option Awards	Restricted Stock Awards

2005 Plan	1,650,000	387,258	927,346	1,314,604	335,396

2018 Plan	300,000	—	30,258	30,258	269,742

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


	Years Ended December 31
	2021		2020		2019
	(Dollars in thousands)
Stock based compensation expense

Restricted stock awards (1)	$	3,580	$	3,272	$	3,679
Directors’ fee expense (2)
Stock options	—		—		23
Restricted stock awards	729		851		701
Total stock based award expense	$	4,309	$	4,123	$	4,403
Related tax benefits recognized in earnings	$	1,212	$	1,159	$	1,238

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

(2)Expense related to awards issued to directors is 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 stock 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.

•Forfeitures on stock compensation are recognized when they occur.

For the years ended December 31, 2021, 2020 and 2019 there were no awards granted by the Company of nonqualified options to purchase shares of common stock.

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 at various dates through 2028.

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


	Years Ended December 31
	2021		2020		2019
	(Dollars in thousands, except per share data)
Fair value of stock options vested based on grant date fair value	n/a		$	22	$	21
Intrinsic value of stock options exercised	$	414	$	404	$	883
Cash received from stock option exercises	$	233	$	279	$	396
Tax benefit realized on stock option exercises	$	116	$	114	$	248

The following table presents a summary of stock option award activity for the year ended December 31, 2021:


	Outstanding
	Stock Option Awards		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (1)
	(Dollars in thousands, except per share data)
Balance at January 1, 2021	28,500		$	47.61
Granted	—		—
Exercised	(8,500)		27.46



Balance of options outstanding, vested and exercisable at December 31, 2021	20,000	(2)	$	56.18	4.63 years	$	509

(1)The aggregate intrinsic value 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, 2021 of $81.65, which would have been received by in-the-money option holders had they all exercised their options as of that date.

(2)Represents vested stock options outstanding to Directors.

For the year ended December 31, 2021, all outstanding stock option awards are vested and there is no unrecognized compensation expense related to those options.

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, 2021, 2020, and 2019 the Company made the following restricted stock award grants:


	Shares Granted	Plan	Fair Value (1)		Vesting Period
Time-vested
2021
2/18/2021	49,550	2005	$	81.84	Ratably over 5 years from grant date
5/25/2021	7,680	2018	$	78.18	Immediately upon grant date
9/1/2021	640	2018	$	76.78	Immediately upon grant date



2020
2/27/2020	46,550	2005	$	70.24	Ratably over 5 years from grant date
4/15/2020	880	2005	$	70.02	Ratably over 5 years from grant date
5/27/2020	9,438	2018	$	72.86	Immediately upon grant date



2019
2/21/2019	43,250	2005	$	83.87	Ratably over 5 years from grant date
3/15/2019	600	2005	$	79.55	Ratably over 5 years from grant date
4/1/2019	1,090	2005	$	82.62	Ratably over 3 years from grant date
5/21/2019	6,500	2018	$	77.08	Immediately upon grant date


Performance-based

2/18/2021	18,900	2005	$	81.84	The earlier of: the date on which it is determined if the performance goal has been achieved; or, March 31, 2024.

2/27/2020	17,100	2005	$	70.24	The earlier of: the date on which it is determined if the performance goal has been achieved; or, March 31, 2023.

2/21/2019	15,900	2005	$	83.87	The earlier of: the date on which it is determined if the performance goal has been achieved; or, March 31, 2022.

(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.

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


	Years Ended December 31
	2021		2020		2019
	(Dollars in thousands)
Fair value of restricted stock awards upon vesting	$	5,754	$	5,580	$	6,005

The following table presents a summary of restricted stock award activity for the year ended December 31, 2021:


	Outstanding Restricted Stock Awards		Weighted Average Grant Price ($)
	(Dollars in thousands, except per share data)
Balance at January 1, 2021	181,505		$	71.46
Granted	76,770		81.43
Vested/released	(68,137)		67.40
Forfeited	(4,965)		73.44
Balance at December 31, 2021	185,173	(1)	$	77.03
Unrecognized compensation cost (inclusive of directors’ fees)					$	8,213
Weighted average remaining recognition period (years)					3.06 years

(1)Inclusive of 4,500 restricted stock awards outstanding to Directors.