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 up to 3,698,974 options and restricted stock to employees and non-employee directors, which includes 330,625 shares as a result of the Corporation's common stock issuance in 2017, 857,191 shares as a result of the completion of the acquisition of Fox Chase in 2016 and 473,483 shares as a result of the completion of the acquisition of Valley Green Bank in 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 2018 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 with respect to certain financial measures over a three-year period. There were 2,631,983 share awards available for future grants at December 31, 2018 under the plan. At December 31, 2018, there were 597,405 options to purchase common stock and 157,579 unvested restricted stock awards outstanding under the plan.

In December 2018, the Corporation's Board of Directors approved an Amended and Restated Univest 2013 Long-Term Incentive Plan to allow for the issuance of restricted stock units.

The following is a summary of the Corporation’s stock option activity and related information for the year ended December 31, 2018:



(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, 2018
Outstanding at December 31, 2017	512,735		$	21.90
Granted	190,778		28.50
Expired	(6,356	)	24.61
Forfeited	(40,002	)	26.29
Exercised	(59,750	)	18.92
Outstanding at December 31, 2018	597,405		23.98		7.2	$	820
Exercisable at December 31, 2018	253,175		20.36		5.5	670

The following is a summary of nonvested stock options at December 31, 2018 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, 2017	352,142		$	6.47
Granted	190,778		6.46
Vested	(158,688	)	6.43
Forfeited	(40,002	)	6.49
Nonvested stock options at December 31, 2018	344,230		6.48

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 the awards. The Corporation records forfeitures as they occur. The following aggregated assumptions were used to estimate the fair value of options granted for the periods indicated:



	For the Years Ended December 31,
	2018		2017		2016
	Actual		Actual		Range			Weighted Average
Expected option life in years	6.6		6.9		7.6	-	8.2	7.9
Risk free interest rate	2.80	%	2.30	%	1.38%	-	1.89%	1.87	%
Expected dividend yield	2.81	%	2.84	%	3.80%	-	4.19%	4.06	%
Expected volatility	27.15	%	29.75	%	37.71%	-	46.22%	45.82	%
Fair value of options	$6.46		$6.72		$5.40	-	$6.27	$6.23

The following is a summary of nonvested restricted stock awards at December 31, 2018 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, 2017	229,026		$	21.93
Granted	59,953		28.39
Vested	(97,201	)	20.13
Forfeited	(34,199	)	22.73
Nonvested share awards at December 31, 2018	157,579		25.33

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,
	2018		2017		2016
Shares granted	59,953		61,823		176,255
Weighted average grant date fair value	$	28.39	$	28.08	$	20.60
Intrinsic value of awards vested	$	2,709	$	2,954	$	1,000

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, 2018 is presented below:



(Dollars in thousands)	Unrecognized Compensation Cost		Weighted-Average Period Remaining (Years)
Stock options	$	1,222	1.8
Restricted stock awards	1,601		1.7
	$	2,823	1.7

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)	2018		2017		2016
Stock-based compensation expense:
Stock options	$	1,020	$	910	$	577
Restricted stock awards	1,537		2,256		1,507
Employee stock purchase plan	68		64		67
Total	$	2,625	$	3,230	$	2,151
Tax benefit on nonqualified stock option expense, restricted stock awards and disqualifying dispositions of incentive stock options	$	620	$	1,432	$	1,135

There were no significant modifications or accelerations to options or restricted stock awards during the period 2016 through 2018. The Corporation typically issues shares for stock option exercises and grants of restricted stock awards from its treasury stock.