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Stock-Based Compensation
12 Months Ended
Dec. 31, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation
Stock-Based Compensation
On July 24, 2014, the Company's shareholders approved the Equity Plan that provides for the issuance of 1,500,000 shares of the Company's common stock in the form of stock options, stock appreciation rights, stock awards (which includes restricted stock units, restricted stock awards, performance units, performance shares or bonus shares) and cash incentive awards. The Company issues new shares of common stock to satisfy share option exercises and restricted stock awards. As of December 31, 2019, shares remain available for future issuance under the Equity Plan totaled 838,932.
(a) Stock Option Awards
Stock options generally vest ratably over three years and expire five years after they become exercisable or vest ratably over four years and expire ten years from date of grant. For the years ended December 31, 2019, 2018 and 2017, the Company did not recognize any compensation expense or related tax benefit related to stock options as all of the compensation expense related to the outstanding stock options had been previously recognized. The intrinsic value from options exercised during the years ended December 31, 2019, 2018 and 2017 was $60,000, $202,000 and $161,000, respectively. The cash proceeds from options exercised during the years ended December 31, 2019, 2018 and 2017 were $58,000, $132,000 and $164,000, respectively.
The following table summarizes the stock option activity for the years ended December 31, 2019, 2018 and 2017:
 
Shares
 
Weighted-Average Exercise Price
 
Weighted-Average
Remaining
Contractual
Term
(In years)
 
Aggregate
Intrinsic
Value
(In
thousands)
Outstanding at December 31, 2016
37,495

 
$
13.77

 
 
 
 
Exercised
(12,662
)
 
12.97

 
 
 
 
Forfeited or expired
(1,602
)
 
13.76

 
 
 
 
Outstanding at December 31, 2017
23,231

 
14.21

 
 
 
 
Exercised
(9,842
)
 
13.45

 
 
 
 
Forfeited or expired
(831
)
 
14.77

 
 
 
 
Outstanding at December 31, 2018
12,558

 
14.77

 
 
 
 
Exercised
(3,901
)
 
14.77

 
 
 
 
Outstanding, vested and expected to vest and exercisable at December 31, 2019
8,657

 
$
14.77

 
0.40
 
$
117


(b) Restricted Stock Awards
Restricted stock awards granted generally have a four-year ratable vesting schedule. For the years ended December 31, 2019, 2018 and 2017 the Company recognized compensation expense related to restricted stock awards of $440,000, $907,000 and $1.4 million, respectively, and a related tax benefit of $93,000, $191,000 and $488,000, respectively. As of December 31, 2019, the total unrecognized compensation expense related to non-vested restricted stock awards was $76,000 and the related weighted average period over which the compensation expense is expected to be recognized is approximately 0.21 years. The vesting date fair value of the restricted stock awards that vested during the years ended December 31, 2019, 2018 and 2017 was $1.3 million, $2.2 million and $2.9 million, respectively.
The following table summarizes the restricted stock award activity for the years ended December 31, 2019, 2018 and 2017:
 
Shares
 
Weighted-Average Grant Date Fair Value
Nonvested at December 31, 2016
261,296

 
$
16.80

Vested
(113,479
)
 
16.55

Forfeited
(10,418
)
 
16.80

Nonvested at December 31, 2017
137,399

 
17.00

Vested
(67,877
)
 
16.74

Forfeited
(3,489
)
 
16.92

Nonvested at December 31, 2018
66,033

 
17.28

Vested
(43,148
)
 
17.07

Forfeited
(2,178
)
 
18.32

Nonvested at December 31, 2019
20,707

 
$
17.59


(c) Restricted Stock Units
During 2017, the Company began issuing RSU and PRSU, collectively called "units." RSUs granted generally vest ratably over three years. PRSUs granted generally have a three-year cliff vesting schedule. Additionally, PRSU grants participate in dividends and may be subject to performance-based vesting as well as other approved vesting conditions. The number of shares actually delivered pursuant to the PRSUs depends on the performance of the Company's Total Shareholder Return and Return on Average Assets over the performance period in relation to the performance of the common stock of a predetermined peer group. The conditions of the grants allow for an actual payout ranging between no payout and 150% of target. The payout level is calculated based on actual performance achieved during the performance period compared to a defined peer group. The fair value of such PRSUs allocable to the performance of the Company's Total Shareholder Return was determined using a Monte Carlo simulation and
will be recognized over the subsequent three-years. The Monte-Carlo simulation model uses the same input assumptions as the Black-Scholes model; however, it also further incorporates into the fair value determination the possibility that the market condition may not be satisfied. Compensation costs related to these awards are recognized regardless of whether the market condition is satisfied, provided that the requisite service has been provided.
Expected volatilities in the model were estimated using a historical period consistent with the performance period of approximately three years. The risk-free interest rate was based on the United States Treasury rate for a term commensurate with the expected life of the grant. The Company used the following assumptions to estimate the fair value of PRSUs granted for the periods indicated:
 
Year ended December 31,
 
2019
 
2018
 
2017
Shares issued
7,198

 
5,550

 
6,089

Expected Term in Years
2.84

 
2.84

 
2.85

Weighted-Average Risk Free Interest Rate
2.47
%
 
2.39
%
 
1.40
%
Weighted Average Fair Value
$
30.06

 
$
27.69

 
$
24.39

Correlation coefficient
ABA NASDAQ Community Bank Index
 
ABA NASDAQ Community Bank Index
 
ABA NASDAQ Community Bank Index
Range of peer company volatilities
19.9% - 75.4%

 
19.0% - 51.4%

 
17.8%-63.1%

Range of peer company correlation coefficients
34.5% - 90.7%

 
28.2% - 94.3%

 
8.2%-89.8%

Heritage volatility
23.9
%
 
22.3
%
 
21.8
%
Heritage correlation coefficient
79.9
%
 
76.4
%
 
75.9
%

For the years ended December 31, 2019, 2018, and 2017 the Company recognized compensation expense related to the units of $2.8 million, $1.8 million, and $712,000 respectively, and a related tax benefit of $589,000, $387,000, and $249,000 respectively. As of December 31, 2019, the total unrecognized compensation expense related to non-vested units was $4.4 million and the related weighted-average period over which the compensation expense is expected to be recognized is approximately 2.02 years. The vesting date fair value of the units that vested during the year ended December 31, 2019 was $2.0 million. There were no PRSUs that vested during the years end December 31, 2019, 2018, and 2017.
The following table summarizes the unit activity for the years ended December 31, 2019, 2018, and 2017:
 
Units
 
Weighted-Average Grant Date Fair Value
Nonvested at December 31, 2016

 
$

Granted
92,356

 
25.31

Forfeited
(1,812
)
 
25.35

Nonvested at December 31, 2017
90,544

 
25.31

Granted
125,633

 
30.62

Vested
(32,375
)
 
25.44

Forfeited
(4,617
)
 
27.82

Nonvested at December 31, 2018
179,185

 
28.94

Granted
126,598

 
31.89

Vested
(64,173
)
 
29.25

Forfeited
(8,070
)
 
30.25

Nonvested at December 31, 2019
233,540

 
$
30.41