On December 31, 2022, the Company had outstanding stock options, stock awards and SARs awarded under its 2011 Incentive Compensation Plan (2011 Plan) and stock awards and SARs awarded under its 2022 Equity Incentive Compensation Plan (2022 Plan). Equity incentive awards are currently granted to Company executives and other key employees. In addition, stock awards are currently granted to non-employee directors of the Company. As of April 26, 2022, no additional stock options, stock awards or SARs may be granted under the 2011 Plan. As of the effective date of the 2022 Plan, 500,000 shares of the Company’s common stock, plus the number of shares that remained available for awards under the 2011 Plan as of April 26, 2022, were available for equity awards under the 2022 Plan. At December 31, 2022, there were 810,080 shares available for grant under the 2022 Plan.

Compensation expense recorded in the consolidated statements of income for all plans was $13,851,000, $11,716,000, and $10,080,000 for the years ended December 31, 2022, 2021 and 2020, respectively. The increase in stock-based compensation in 2022 versus 2021 was primarily attributable to the accelerated vesting of certain equity grants for the Company’s former Chief Executive Officer, who retired on April 25, 2022. In addition, management’s assessment that higher performance targets for certain grants would be achieved led to the increase of compensation expenses for performance awards.

The total income tax benefit recognized in the income statement for share-based compensation arrangements was $3,537,000, $2,867,000, and $2,390,000 for the years ended December 31, 2022, 2021 and 2020, respectively.

Under all plans, stock option awards are granted with an exercise price equal to the market price of the Company’s stock at the date of grant. The market price is defined and calculated as the average of the opening and closing prices for Company common stock on the grant date as reported in the New York Stock Exchange – Composite Transactions. Stock option awards granted prior to 2017 generally cliff vested after two years. Starting in 2017, stock options have a three-year graded vesting feature, with one-third of the awards vesting each year. The Company has elected the straight-line method of expense attribution for the stock options with graded vesting feature. These options have a 10-year contractual term. The fair value of each option award was estimated on the date of grant using the Black-Scholes option valuation model incorporating the weighted-average assumptions noted in the following table. Expected volatility is based on the historical volatility of the Company’s common stock. The Company also uses historical data to estimate the expected term of options granted. The risk-free rate is the U.S. Treasury note rate that corresponds to the expected option term at the date of grant. The following are the weighted-average assumptions used to calculate the grant-date fair values of stock option awards granted in the years ended December 31, 2022, 2021 and 2020:


	For the Years Ended December 31
	2022	2021	2020
Expected dividend yield	1.18%	1.30%	1.31%
Expected volatility	32.27%	31.81%	26.00%
Expected term	6.0 years	7.3 years	7.3 years
Risk-free interest rate	1.93%	0.96%	1.47%

A summary of stock option activity for the year ended December 31, 2022 is presented below:


	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value ($000)
Options
Outstanding at January 1, 2022		435,966		$	81.92
Granted		34,444			114.43
Exercised		(11,888	)		65.74
Forfeited		(31,361	)		115.43
Outstanding at December 31, 2022		427,161			82.53		5.27	$	10,224
Vested or expected to vest at December 31, 2022		427,161			82.53		5.27		10,224
Exercisable at December 31, 2022		408,802			80.80		5.14		10,488

The weighted-average grant-date fair values of options awarded during the years ended December 31, 2022, 2021 and 2020, were $32.21, $36.49, and $25.90, respectively. The total intrinsic values of options exercised during the years ended December 31, 2022, 2021, and 2020 were $475,000, $1,287,000, and $2,534,000, respectively.

As of December 31, 2022, the total unrecognized compensation cost for unvested stock options was $692,000. That cost is expected to be recognized over a weighted-average period of 1.2 years.

Cash received from stock option exercises under the Company’s stock option plans for the years ended December 31, 2022, 2021, and 2020 was $782,000, $1,369,000, and $2,926,000, respectively. The actual tax benefit realized for the tax deductions from stock option exercises totaled $36,000, $172,000, and $339,000 for the years ended December 31, 2022, 2021 and 2020, respectively.

In 2020, 2021, and 2022, the Company granted stock awards under the 2011 Plan and, starting in April 2022, the Company also granted stock awards under the 2022 Plan. Most Company stock awards are granted in the form of performance awards. The performance stock awards vest only upon the Company’s achievement of certain levels of financial performance by the end of specified measurement periods as approved by the Board of Directors. The number of shares of the Company’s common stock ultimately distributed, if any, is contingent upon the Company’s actual financial performance attained by the end of the measurement period relative to the targets approved by the Board of Directors. The fair value of performance stock awards equals the grant-date market price of the Company’s common stock, discounted for the estimated amount of dividends that would not be received during the measurement period. Compensation expense is recorded each reporting period based on the probable number of awards that will ultimately vest given the projected level of financial performance. If at the end of the measurement period the performance objectives are not met, no compensation cost is recognized and any compensation expense recorded in prior periods is reversed. Under the 2011 Plan, the Company periodically granted stock awards that have no performance conditions associated with their vesting. Under the 2022 Plan, stock awards that have no performance conditions may be routinely granted to eligible employees. These stock awards vest after the period of service established for the given grant. In addition, the Company grants stock awards that have no performance conditions associated with their vesting to non-employee directors of the Company.

A summary of stock award activity for the year ended December 31, 2022, is presented below:


	Shares			Weighted-Average Grant Date Fair Value
Stock Awards
Unvested at January 1, 2022		103,278		$	61.30
Granted		64,392			106.78
Vested		(69,314	)		99.30
Forfeited/Modified due to change of assumptions		5,613			86.94
Unvested at December 31, 2022		103,969			110.50

The weighted-average grant-date fair values of stock awards granted during the years ended December 31, 2022, 2021 and 2020, were $106.78, $119.76, and $98.46, respectively. As of December 31, 2022, under the current Company assumption as to the number of shares of the Company’s common stock underlying stock awards that will vest at the measurement periods ended December 31, 2023

and 2024, there was $6,144,000 of unrecognized compensation cost for unvested stock awards. That cost is expected to be recognized over a period of 1.7 years.

At December 31, 2022, the Company had both cash-settled and Company stock-settled SARs outstanding. SARs granted prior to 2015 are cash-settled, and SARs granted in 2015 and later are stock-settled. SARs granted prior to 2017 cliff vested after two years. Starting in 2017, SARs have a three-year graded vesting feature, with one-third of the awards vesting each year. The Company has elected the straight-line method of expense attribution for the SARs with graded vesting feature. All SARs expire ten years from the grant date. Upon the exercise of a SARs award, a participant receives cash (for cash-settled SARs) or Company common stock (for stock-settled SARs). For cash-settled SARs, an amount equals the excess of the fair market value of a total number of shares/SARs exercised at the date of exercise over the fair market value of a total number of shares/SARs exercised at the date of grant (the exercise price). For stock-settled SARs, the number of shares equals the excess of the fair market value of a total number of shares/SARs exercised at the date of exercise over the fair market value of a total number of shares/SARs exercised at the date of grant (the exercise price) divided by the fair market value of a share of Company common stock at the date of exercise. Cash-settled SARs are accounted for as liabilities that must be re-measured at fair value at the end of every reporting period until settlement. Compensation expense for each reporting period is based on the period-to-period change (or portion of the change, depending on the proportion of the vesting period that has been completed at the reporting date) in the fair value of the SARs. Compensation expense for stock-settled SARs is based on the grant-date value of the awards allocated over the proportion of the vesting period that has been completed at the reporting date. Because stock-settled SARs are considered equity instruments, they are not re-measured at fair value at the end of each reporting period.

The following is a summary of SARs activity for the year ended December 31, 2022:


	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value ($000)
SARs
Outstanding at January 1, 2022		726,987		$	90.06
Granted		188,957			110.04
Exercised		(31,562	)		63.06
Forfeited		(34,226	)		115.20
Outstanding at December 31, 2022		850,156			94.49		6.62	$	10,176

The weighted-average grant-date fair values of SARs granted during the years 2022, 2021 and 2020 were $34.76, $36.49, and $25.88, respectively. The fair value for each SARs award was estimated using the Black-Scholes valuation model incorporating the same assumptions as noted for stock options.

As of December 31, 2022, and 2021, the liability for cash-settled SARs recorded on the consolidated balance sheet (non-current liabilities) was $747,000 and $1,502,000, respectively. At December 31, 2022, there was $5,211,000 of total unrecognized compensation cost related to all unvested SARs. That cost is to be recognized over a weighted-average period of 1.8 years.

In general, it is the Company’s policy to issue new shares of its common stock upon the exercise of stock options and stock-settled SARs or the vesting of stock awards.