16. STOCK-BASED COMPENSATION

Our Stock Incentive Plans provide for the granting of stock options, stock appreciation rights, performance awards, restricted stock and restricted stock unit awards (RSUs), deferred stock units, and other awards that are payable in or valued by reference to our common shares. Upon stockholder approval in 2018, the 2013 Incentive Plan was replaced by the 2018 Incentive Plan (2018 Plan). We still have awards outstanding under the 2013 Plan for officers, directors and Associates. The 2018 Plan will terminate on the tenth anniversary of its effective date, after which no awards may be granted. Collectively, the 2013 Plan and the 2018 Plan are referred to as Stock Incentive Plans. The number of shares reserved for issuance under the 2018 Plan is 1,500,000, of which 1,483,392 shares were available for future grants at December 31, 2018. Generally, all awards become exercisable immediately in the event of a change in control, as defined within the Stock Incentive Plans.

Total stock-based compensation expense recognized was $2.6 million ($2.0 million after tax) for 2018, $3.7 million ($2.5 million after tax) for 2017, and $3.0 million ($2.0 million after tax) for 2016. Stock-based compensation expense related to awards granted to Associates is recorded in Salaries, benefits and other compensation; expense related to awards granted to directors is recorded in Other operating expense in our Consolidated Statements of Income.

Stock Options

Stock options are granted with an exercise price not less than the fair market value of our common stock on the date of the grant. With the exception of certain Non-Plan Stock Options (as defined below), all stock options granted during 2018, 2017, and 2016 vest in 25% per annum increments, start to become exercisable in April of the year following the year of grant, and expire between five years and seven years from the grant date. We issue new shares upon the exercise of options.

We determine the grant date fair value of stock options using the Black-Scholes option-pricing model. The model requires the use of numerous assumptions, many of which are subjective. Beginning in 2016, the expected term was derived from historical exercise patterns and represents the amount of time that stock options granted are expected to be outstanding. Other significant assumptions to determine 2018, 2017, and 2016 grant date fair value included volatility measured using the fluctuation in month end closing stock prices over a period which corresponds with the average expected option life; a weighted-average risk-free rate of return (zero coupon treasury yield); and a dividend yield indicative of our current dividend rate. The assumptions for options issued during 2018, 2017, and 2016 are presented below:



	2018		2017		2016
Expected term (in years)	5.3		5.3		5.3
Volatility	23.0	%	24.9	%	29.6	%
Weighted-average risk-free interest rate	2.69	%	1.95	%	1.25	%
Dividend yield	0.74	%	0.60	%	0.80	%

On April 25, 2013 stockholders approved a change in future compensation for Mark A. Turner, President and CEO. As a result, Mr. Turner was granted 750,000 non-statutory stock options (Non-Plan Stock Options) with a longer and slower vesting schedule than our standard options. Under this vesting schedule, 40% of these options vested after the second year and 20% vested in each of the following three years. These options were awarded at an exercise price of 20% over the December 2012 market value (the date on which framework of the plan was decided). Upon the grant, Mr. Turner was no longer eligible to receive grants under any of our other stock based award programs for a period of 5 years, ending on February 28, 2018. The Black-Scholes option-pricing model was used to determine the grant date fair value of the options. Significant assumptions used in the model included a weighted-average risk-free rate of return (zero coupon treasury yield) of 0.76%; an expected option life of 5 years; an expected stock price volatility of 40.5%; and a dividend yield of 1.01%. These awards fully vested in 2018. At December 31, 2018, 376,177 of these option awards were outstanding and exercisable. In March 2018, based on performance in 2017, Mr. Turner was granted stock options and RSUs with terms and conditions, including exercise price and vesting period, pursuant to our 2013 Incentive Plan.

Additionally, in 2013, 450,000 incentive stock options were issued to certain executive officers of the Company under the 2013 Plan. These options had the same vesting schedule and exercise price as the Non-Plan Stock Options granted to Mr. Turner. The Black-Scholes option-pricing model with the same assumptions as the Non-Plan Stock Options was used to determine the grant date fair value of the options. These awards fully vested in 2018.

A summary of the status of our options as of December 31, 2018, and changes during the year, is presented below:



	2018
	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Year)	Aggregate Intrinsic Value (In Thousands)
Stock Options:
Outstanding at beginning of year	1,339,106	$	19.08	2.56	$	38,525
Plus: Granted	72,521	48.33
Less: Exercised	613,588	17.63
Forfeited	7,295	47.01
Outstanding at end of year	790,744	22.48		2.18	13,235
Nonvested at end of year	124,348	42.76		5.69	603
Exercisable at end of year	666,396	18.69		1.58	12,923

The weighted-average fair value of options granted was $11.62 in 2018, $11.50 in 2017 and $7.84 in 2016. The aggregate intrinsic value of options exercised was $20.6 million in 2018, $7.5 million in 2017, and $5.0 million in 2016.

The following table provides information about our nonvested stock options outstanding at December 31, 2018:



	2018
	Shares	Weighted- Average Exercise Price		Weighted- Average Grant Date Fair Value
Stock Options:
Nonvested at beginning of period	389,134	$	23.25	$	6.24
Plus: Granted	72,521	48.33		11.62
Less: Vested	330,012	20.59		5.69
Forfeited	7,295	47.01		11.38
Nonvested at end of period	124,348	42.76		10.38

The total amount of unrecognized compensation cost related to nonvested stock options as of December 31, 2018 was $0.9 million. The weighted-average period over which the expense is expected to be recognized is 2.6 years. During 2018, we recognized $0.7 million of compensation expense related to these awards.

Restricted Stock Units

RSUs are granted at no cost to the recipient and generally vest over a four year period. All outstanding awards granted to senior executives vest over no less than a four year period. The 2013 and 2018 Plans allow for awards with vesting periods less than four years, subject to Board approval. The fair value of RSUs is equal to the fair value of the common stock on the date of grant.

We recognize the expense related to RSUs granted to Associates in Salaries, benefits and other compensation and granted to directors in Other operating expense on an accrual basis over the requisite service period for the entire award. When we award restricted stock to individuals from whom we may not receive services in the future, we recognize the expense of restricted stock grants when we make the award, instead of amortizing the expense over the vesting period of the award.

The weighted-average fair value of RSUs granted was $48.38 in 2018, $47.05 in 2017, and $29.94 in 2016. The total amount of compensation cost to be recognized relating to nonvested restricted stock as of December 31, 2018, was $3.6 million. The weighted-average period over which the cost is expected to be recognized is 2.6 years. During 2018, we recognized $1.6 million of compensation cost related to these awards.

The following table summarizes the Company’s RSUs and changes during the year:



	Units (in whole)	Weighted Average Grant-Date Fair Value per Unit
Balance at December 31, 2017	114,388	$	35.54
Plus: Granted	49,561	48.38
Less: Vested	62,500	32.48
Forfeited	5,742	39.77
Balance at December 31, 2018	95,707	43.08

The total fair value of RSUs that vested was $1.6 million in 2018, $1.2 million in 2017, and $1.4 million in 2016.