SHARE BASED COMPENSATION

12 Months Ended

Dec. 31, 2017

Note 12 – Share Based Compensation

At December 31, 2017, the Company had two share-based compensation plans in existence, the 2005 Omnibus Stock Plan (“Omnibus Stock Plan”) and the 2015 Omnibus Incentive Plan (“Omnibus Incentive Plan”). The Omnibus Stock Plan expired during the second quarter of 2015 but has outstanding options that may still be exercised. The Omnibus Incentive Plan is described in the following paragraph.

The Company’s Omnibus Incentive Plan was approved on May 6, 2015 and provides for the granting of non-qualifying stock options to the Company’s directors, and incentive and non-qualifying stock options, stock appreciation rights, restricted stock grants, restricted stock units and performance awards to selected key employees on a periodic basis at the discretion of the board. The Omnibus Incentive Plan authorizes the issuance of up to 1,500,000 shares of common stock, of which 1,340,359 shares are available for issuance at December 31, 2017, has a term of ten years, and is administered by a committee of at least three directors appointed by the board of directors. Options granted under the plan have an exercise price which may not be less than 100% of the fair market value of the common stock on the date of the grant and must be exercised within seven to ten years from the date of grant. The exercise price of stock options must be paid for in full in cash or shares of common stock, or a combination of both. The board committee has the discretion when making a grant of stock options to impose restrictions on the shares to be purchased upon the exercise of such options. The Company generally issues authorized but previously unissued shares to satisfy option exercises.

The fair values of all of the options granted for the periods indicated have been estimated using a binomial option-pricing model with the weighted-average assumptions for the years ended December 31 are presented in the following table:

	2017		2016		2015
Dividend yield	2.45	%	3.48	%	3.40	%
Weighted average expected volatility	40.27	%	41.54	%	42.98	%
Weighted average risk-free interest rate	2.14	%	1.42	%	1.42	%
Weighted average expected lives (in years)	5.67		5.71		5.42
Weighted average grant-date fair value	$13.42		$7.75		$7.63

The dividend yield is based on estimated future dividend yields. The risk-free rate for periods within the contractual term of the share option is based on the U.S. Treasury yield curve in effect at the time of the grant. Expected volatilities are generally based on historical volatilities. The expected term of share options granted is generally derived from historical experience. The Company recognized forfeitures as they occur.

Compensation expense is recognized on a straight-line basis over the vesting period of the respective stock option or restricted stock grant. Compensation expense of $2.1 million, $1.9 million, and $1.9 million was recognized for the years ended December 31, 2017, 2016 and 2015, respectively, related to the awards of stock options and restricted stock grants. The intrinsic value for the stock options exercised was $0.7 million, $0.6 million, and $0.5 million in the years ended December 31, 2017, 2016 and 2015, respectively. The total of unrecognized compensation cost related to stock options was approximately $0.2 million as of December 31, 2017. That cost is expected to be recognized over a weighted average period of approximately 1.8 years. The total of unrecognized compensation cost related to restricted stock was approximately $4.3 million as of December 31, 2017. That cost is expected to be recognized over a weighted average period of approximately 3.0 years. The fair value of the options vested during the years ended December 31, 2017, 2016 and 2015, was $0.2 million, $0.2 million and $0.2 million, respectively.

In the first quarter of 2017, 12,941 stock options were granted, subject to a three year vesting schedule with one third of the options vesting on April 1^st of each year. The Company granted 48,338 shares of restricted stock in the first quarter of 2017, which are subject to a five year vesting schedule with one fifth of the shares vesting on April 1^st of each year. An additional 6,873 shares of performance based restricted stock grants were also approved as part of the restricted shares granted in the first quarter. The performance shares are subject to cliff vesting after three years based on the relative performance of the Company’s stock in comparison to a selected peer group. Vesting can vary from 0-150% of the target grant based on the results of the Company’s stock performance. There were no additional stock options or shares of restricted stock granted during the remainder of 2017.

A summary of share option activity for the period indicated is reflected in the following table:

					Weighted
		Number	Weighted		Average	Aggregate
		of	Average		Contractual	Intrinsic
		Common	Exercise		Remaining	Value
		Shares	Share Price		Life(Years)	(in thousands)
Balance at January 1, 2017		108,503	$	22.46		$	1,902
Granted		12,941	$	42.48
Exercised		(30,567)	$	19.39		$	669
Forfeited or expired		(3,577)	$	30.07
Balance at December 31, 2017		87,300	$	26.22	3.5	$	1,160
Exercisable at December 31, 2017		56,815	$	22.42	2.5	$	943

Weighted average fair value of options
	granted during the year		$	13.42

A summary of the activity for the Company’s restricted stock for the period indicated is presented in the following table:

	Number	Weighted
	of	Average
	Common	Grant-Date
(In dollars, except share data):	Shares	Fair Value
Restricted stock at January 1, 2017	212,646	$	25.19
Granted	55,211	$	42.48
Vested	(70,382)	$	23.77
Forfeited	(8,440)	$	27.42
Restricted stock at December 31, 2017	189,035	$	30.67