Stock-Based Incentive Plan

The Corporation has a shareholder approved 2013 Long-Term Incentive Plan which replaced the expired 2003 Long-Term Incentive Plan. Under the 2013 Long-Term Incentive Plan, the Corporation may grant options and share awards to employees and non-employee directors up to 3,355,786 shares of common stock, which includes 857,191 shares as a result of the completion of the acquisition of Fox Chase on July 1, 2016 and 473,483 shares as a result of the completion of the acquisition of Valley Green Bank on January 1, 2015. The number of shares of common stock available for issuance under the plan is subject to adjustment, as described in the plan. This includes, in the event of any merger, reorganization, consolidation, recapitalization, stock dividend, or other change in corporate structure affecting the stock, substitution or adjustment shall be made in the aggregate number of shares reserved for issuance under the plan, in the number and option price of shares subject to outstanding options granted under the plan and in the number and price of shares subject to other awards, as described in the plan. The plan provides for the issuance of options to purchase common shares at prices not less than 100 percent of the fair market value on the date of option grant and have a contractual term of ten years; and for restricted stock awards valued at not less than 100 percent of the fair market value at the date of award grant. The options issued in 2016 become exercisable and vest at 33.3 percent per year for each of the following three years and remain exercisable for a period not exceeding ten years from the date of grant. For the majority of the restricted stock awards, the shares vest based upon the Corporation’s performance against selected peers with respect to certain financial measures over a three-year period. There were 2,747,871 share awards available for future grants at December 31, 2016 under the plan. At December 31, 2016, there were 504,908 options to purchase common stock and 285,158 unvested restricted stock awards outstanding under the plan.

The following table is a summary of the status of options under the Corporation’s long-term incentive plans:



(Dollars in thousands, except per share data)	Shares Under Option		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value at December 31, 2016
Outstanding at December 31, 2015	668,667		$	18.88
Granted	160,312		19.73
Expired	—		—
Forfeited	(62,537	)	18.93
Exercised	(261,534	)	19.04
Outstanding at December 31, 2016	504,908		19.06		6.2	$	5,979
Exercisable at December 31, 2016	195,968		19.24		3.2	2,285

The following is a summary of nonvested stock options at December 31, 2016 including changes during the year:



(Dollars in thousands, except per share data)	Nonvested Stock Options		Weighted Average Grant Date Fair Value
Nonvested stock options at December 31, 2015	299,665		$	5.91
Granted	160,312		6.23
Vested	(88,500	)	5.47
Forfeited	(62,537	)	6.16
Nonvested stock options at December 31, 2016	308,940		6.15

The total intrinsic value of options exercised during 2016, 2015, and 2014 was $2.1 million, $103 thousand, and $47 thousand, respectively. The Corporation has a stock-for-stock-option exchange (or cashless exercise) program in place, whereby optionees can exchange the value of the spread of in-the-money vested options for Corporation stock having an equivalent value. This broker-assisted exchange allows the optionees to exercise their vested options on a net basis without having to pay the exercise price or related expenses in cash. However, it will result in the optionees acquiring fewer shares than the number of options exercised.

The Corporation's estimate of the fair value of a stock option is based on expectations derived from historical experience and may not necessarily equate to its market value when fully vested. The life of the option is based on historical factors which include the contractual term, vesting period, exercise behavior and employee turnover. The risk-free rate for periods within the expected term of the option is based on the U.S. Treasury strip rate in effect at the time of grant. Expected volatility is based on the historical volatility of the Corporation’s stock over the expected life of the grant. The Corporation uses a straight-line accrual method to recognize stock-based compensation expense over the time-period it expects the options to vest.

The Corporation recognizes compensation expense for stock options over the requisite service period based on the grant-date fair value of those awards expected to ultimately vest. Forfeitures are estimated on the date of grant and revised if actual or expected forfeiture activity differs materially from original estimates. The following aggregated assumptions were used to estimate the fair value of options granted for the periods indicated:



	For the Years Ended December 31,
	2016						2015			2014
	Range			Weighted Average			Actual			Actual
Expected option life in years	7.6	-	8.2	7.9			8.0			8.2
Risk free interest rate	1.38%	-	1.89%	1.87		%	1.64		%	2.51		%
Expected dividend yield	3.80%	-	4.19%	4.06		%	4.32		%	4.26		%
Expected volatility	37.71%	-	46.22%	45.82		%	49.38		%	50.16		%
Fair value of options	$5.40	-	$6.27	$	6.23		$	6.07		$	6.53

The following is a summary of nonvested restricted stock awards at December 31, 2016 including changes during the year:



(Dollars in thousands, except per share data)	Nonvested Share Awards		Weighted Average Grant Date Fair Value
Nonvested share awards at December 31, 2015	183,584		$	18.00
Granted	176,255		20.60
Vested	(51,272	)	17.31
Forfeited	(23,409	)	17.86
Nonvested share awards at December 31, 2016	285,158		19.74

The fair value of restricted stock is equivalent to the fair value on the date of grant and is amortized over the vesting period. Certain information regarding restricted stock is summarized below for the periods indicated:



(Dollars in thousands, except per share data)	For the Years Ended December 31,
	2016		2015		2014
Shares granted	176,255		65,755		74,304
Weighted average grant date fair value	$	20.60	$	18.62	$	18.63
Intrinsic value of awards vested	$	1,000	$	749	$	735

The total unrecognized compensation expense and the weighted average period over which unrecognized compensation expense is expected to be recognized related to nonvested stock options and nonvested restricted stock awards at December 31, 2016 is presented below:



(Dollars in thousands)	Unrecognized Compensation Cost		Weighted-Average Period Remaining (Years)
Stock options	$	1,020	1.9
Restricted stock awards	3,155		1.7
	$	4,175	1.8

The following table presents information related to the Corporation’s compensation expense related to stock incentive plans recognized for the periods indicated:



	For the Years Ended December 31,
(Dollars in thousands)	2016		2015		2014
Stock-based compensation expense:
Stock options	$	577	$	528	$	463
Restricted stock awards	1,507		893		679
Employee stock purchase plan	67		53		46
Total	$	2,151	$	1,474	$	1,188
Tax benefit on nonqualified stock option expense, restricted stock awards and disqualifying dispositions of incentive stock options	$	836	$	339	$	244

There were no significant modifications or accelerations to options or restricted stock awards during the period 2014 through 2016.

The Corporation typically issues shares for stock option exercises and grants of restricted stock awards from its treasury stock.