17. STOCK-BASED COMPENSATION PLANS

At December 31, 2014, the Company had three stock-based compensation plans: the 2005 Equity Incentive Plan, the 2011 Incentive Plan and the 2014 Incentive Plan (collectively, “the Plans”). Under the Plans, options to purchase common stock were granted to officers and key employees at exercise prices not less than the fair market value of the Company’s common stock on the date of the grant. The Company issues new common stock to satisfy stock option exercises and the issuance of restricted stock awards. Awards are no longer granted under the 2005 and 2011 plans.

Stock options and restricted stock awards were granted on August 26, 2014, December 2, 2013, and on December 1, 2012. Under the 2011 and 2014 Incentive Plans, stock options and restricted stock awards are valued at fair market value based on the Company’s closing stock price on the date of grant. Under 2005 plan, stock options were valued at fair market value based on the average of the Company’s high and low trade prices on the date of grant. The stock options and restricted stock awards granted in 2014, 2013 and 2012 vest ratably over four years. Stock options granted between 2014 and 2011 expire six years from the date of grant. Stock options granted between 2006 and 2010 expire five years from the date of grant. Stock options granted prior to 2006 expire ten years from the grant date, with the exception of certain incentive stock options, which expired five years from the date of grant. As of December 31, 2014, there were 643,400 shares remaining available for stock-based awards under the 2014 Incentive Plan.

In accordance with ASC 718, stock-based compensation expense was recognized in the 2014, 2013 and 2012 consolidated financial statements for stock options and restricted stock awards granted since 2008. An estimate of forfeitures, based on historical data, was included in the calculation of stock-based compensation, and the estimate was adjusted quarterly to the extent that actual forfeitures differ, or are expected to materially differ, from such estimates. The effect of applying the expense recognition provisions of ASC 718 in 2014, 2013 and 2012 decreased Earnings Before Provision For Income Taxes by approximately $1,465,000, $1,283,000 and $1,201,000, respectively.

As of December 31, 2014, there was $2.1 million of total unrecognized compensation cost related to non-vested stock options granted in the years 2011 through 2014 which is expected to be recognized over the weighted-average remaining vesting period of 2.8 years. As of December 31, 2014, there was $1.3 million of total unrecognized compensation cost related to non-vested restricted stock awards granted in the years 2011 through 2014 which is expected to be recognized over the weighted-average remaining vesting period of 2.9 years.

The following weighted-average assumptions were used to determine compensation expense related to stock options in 2014, 2013 and 2012:

	2014			2013			2012
Risk-free interest rate		1.45	%		1.10	%		0.51	%
Expected dividend yield		2.81	%		2.53	%		2.89	%
Expected term		4.3 years			4.3 years			4.3 years
Expected volatility		17.8	%		16.2	%		26.4	%

The risk-free interest rate is based on U.S. Treasury bonds with a remaining term equal to the expected term of the award. The expected dividend yield is based on the Company’s expected annual dividend as a percentage of the market value of the Company’s common stock in the year of grant. The expected term of the stock options is determined using historical experience. The expected volatility is based upon historical stock prices over the most recent period equal to the expected term of the award.

The following tables summarize stock option activity under the Company’s plans:

Stock Options


	Years ended December 31,
	2014					2013					2012
*Stock Options*	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Outstanding at beginning of year		1,260,866		$	24.41		1,265,792		$	22.76		1,307,488		$	21.76
Granted		331,600			27.04		333,300			28.50		253,400			23.53
Exercised		(218,150	)		22.37		(219,526	)		17.91		(174,646	)		13.17
Forfeited or expired		(18,900	)		25.71		(118,700	)		30.30		(120,450	)		27.37
Outstanding at end of year		1,355,416		$	25.36		1,260,866		$	24.41		1,265,792		$	22.76
Exercisable at end of year		603,834		$	23.66		581,081		$	22.39		706,863		$	21.89
Weighted average fair market value of options granted	$	2.93				$	2.77				$	3.68

	Weighted Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value
Outstanding – December 31, 2014		3.8	$	5,839,000
Exercisable – December 31, 2014		2.4	$	3,631,000

The aggregate intrinsic value of outstanding and exercisable stock options is defined as the difference between the market value of the Company’s stock on December 31, 2014 of $29.67 and the exercise price multiplied by the number of in-the-money outstanding and exercisable stock options.

Non-vested Stock Options

Non-vested Stock Options	Number of Options			Weighted Average Exercise Price		Weighted Average Fair Value
Non-vested – December 31, 2011		485,978		$	24.46	$	4.70
Granted		253,400			23.53		3.68
Vested		(173,824	)		25.05		4.73
Forfeited		(6,625	)		24.26		4.60
Non-vested – December 31, 2012		558,929		$	23.86	$	4.23
Granted		333,300			28.50		2.77
Vested		(207,044	)		23.83		4.42
Forfeited		(5,400	)		23.95		4.28
Non-vested – December 31, 2013		679,785		$	26.14	$	3.46
Granted		331,600			27.04		2.93
Vested		(243,303	)		25.54		3.80
Forfeited		(16,500	)		25.98		3.44
Non-vested – December 31, 2014		751,582		$	26.74	$	3.12

The following table summarizes information about outstanding and exercisable stock options at December 31, 2014:

	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number of Options Outstanding		Weighted Average Remaining Contractual Life (in Years)		Weighted Average Exercise Price		Number of Options Exercisable		Weighted Average Exercise Price
$18.03		105,166		0.32	$	18.03		105,166	$	18.03
$23.53 to $24.49		594,250		2.82		24.01		416,518		24.12
$27.04 to $28.50		656,000		5.29		27.76		82,150		28.50
		1,355,416		3.82	$	25.36		603,834	$	23.66

The following table summarizes stock option activity for the years ended December 31:

	2014		2013		2012
	(Dollars in thousands)
Total intrinsic value of stock options exercised	$	1,108	$	1,506	$	1,704
Cash received from stock option exercises	$	4,881	$	3,932	$	2,300
Income tax benefit from the exercise of stock options	$	432	$	588	$	664
Total fair value of stock options vested	$	923	$	915	$	821

Restricted Stock

The following table summarizes restricted stock award activity during the years ended December 31, 2012, 2013 and 2014:

Non-vested Restricted Stock	Shares of Restricted Stock			Weighted Average Grant Date Fair Value
Non-vested – December 31, 2011		38,000		$	24.47
Issued		19,600			23.53
Vested		(15,025	)		24.97
Forfeited		—			—
Non-vested – December 31, 2012		42,575			23.87
Issued		20,400			28.50
Vested		(15,475	)		23.85
Forfeited		—			—
Non-vested – December 31, 2013		47,500		$	25.86
Issued		24,400			27.04
Vested		(17,850	)		25.31
Forfeited		—			—
Non-vested – December 31, 2014		54,050		$	26.58

At December 31, 2014, the Company expected 54,050 shares of restricted stock to vest over a weighted-average remaining contractual term of 2.8 years. These shares had an aggregate intrinsic value of $1.6 million at December 31, 2014. The aggregate intrinsic value was calculated using the market value of the Company’s stock on December 31, 2014 of $29.67 multiplied by the number of non-vested restricted shares outstanding. The income tax benefit from the vesting of restricted stock for the years ended December 31 was approximately $183,000 in 2014, $177,000 in 2013, and $137,000 in 2012.