STOCK-BASED COMPENSATION

The Company may grant stock options and restricted stock under its stock-based compensation plans to certain officers, employees and directors. These plans are administered by a committee of the Board of Directors. The Company's stock-based compensation plans at December 31, 2018 are described below.

2011 Long-Term Incentive Plan ("2011 LTIP"): The Company’s 2011 LTIP, as subsequently amended with shareholder approval, has reserved 1,500,000 shares of the Company's common stock for potential stock-based awards. This plan provides for certain stock-based awards such as, but not limited to, stock options, stock appreciation rights and restricted common stock, as well as cash performance awards. As of December 31, 2018, approximately 127,000 shares were available for grant under this plan.

2002 Stock Incentive Plan: The Company’s 2002 Stock Incentive Plan, as subsequently amended with shareholder approval, reserved a total of 1,175,000 shares of the Company's common stock for potential stock options. This plan became fully utilized in 2012 and no further awards may be granted under this plan.

Acquired Equity Incentive Plan: In 2016, the Company assumed sponsorship of an equity incentive plan of an acquired company to allow for that company's already granted awards that became exercisable upon acquisition to be honored. No further awards may be granted under this assumed plan.

In general, for stock options granted the exercise price will not be less than the fair value of the Company’s common stock on the date of grant, the options will become exercisable based upon vesting terms determined by the committee, and the options will expire ten years after the date of grant. In general, for restricted stock granted the shares are issued at the fair value of the Company’s common stock on the date of grant, are restricted as to transfer, but are not restricted as to dividend payments or voting rights, and the transfer restrictions lapse over time, depending upon vesting terms provided for in the grant and contingent upon continued employment.

A Black-Scholes model is utilized to estimate the fair value of stock options. See Note 1 for the Company’s accounting policy on stock-based compensation. The weighted average assumptions used in the model for valuing stock option grants were as follows.



	2018			2017			2016
Dividend yield	—		%	—		%	—		%
Expected volatility	25		%	25		%	25		%
Risk-free interest rate	2.61		%	2.14		%	1.52		%
Expected average life	7 years			7 years			7 years
Weighted average per share fair value of options	$	17.36		$	15.80		$	11.04

A summary of the Company’s stock option activity is summarized below.



Stock Options	Option Shares Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Life (Years)	Aggregate Intrinsic Value (in thousands)
Outstanding – December 31, 2015	746,004		$	21.56
Granted	170,500		36.86
Options assumed in acquisition	91,701		21.03
Exercise of stock options *	(84,723	)	20.98
Forfeited	(1,456	)	21.71
Outstanding – December 31, 2016	922,026		$	24.39	5.4	$	21,483
Granted	949,500		49.93
Exercise of stock options *	(209,371	)	18.15
Forfeited	(18,900	)	35.36
Outstanding – December 31, 2017	1,643,255		$	39.82	8.1	$	24,525
Granted	15,500		52.76
Exercise of stock options *	(70,556	)	21.52
Forfeited	(6,500	)	39.43
Outstanding – December 31, 2018	1,581,699		$	40.77	7.4	$	13,825
Exercisable – December 31, 2018	599,011		$	32.77	6.3	$	9,798

*The terms of the stock option agreements permit having a number of shares of stock withheld, the fair market value of which as of the date of exercise is sufficient to satisfy the exercise price and/or tax withholding requirements, and accordingly 6,411 shares, 85,422 shares, and 10,244 shares were surrendered during 2018, 2017, and 2016, respectively.

The following options were outstanding at December 31, 2018.



	Number of Shares		Weighted Average Exercise Price				Weighted Average Remaining Life (Years)
	Outstanding	Exercisable	Outstanding		Exercisable		Outstanding	Exercisable
$9.19 – $20.00	99,267	85,579	$	16.39	$	16.38	2.0	1.8
$20.01 – $25.00	202,268	160,468	23.77		23.77		5.8	5.8
$25.01 – $30.00	142,294	87,494	25.97		26.01		6.1	6.1
$30.01 – $40.00	180,370	77,070	35.95		35.41		7.4	7.3
$40.01 – $56.43	957,500	188,400	49.99		49.94		8.5	8.4
	1,581,699	599,011	$	40.77	$	32.77	7.4	6.3

Intrinsic value represents the amount by which the fair market value of the underlying stock exceeds the exercise price of the stock options. The intrinsic value of options exercised in 2018, 2017, and 2016 was approximately $2.2 million, $7.5 million, and $1.3 million, respectively.

A summary of the Company’s restricted stock activity is summarized below.



Restricted Stock	Restricted Shares Outstanding		Weighted Average Grant Date Fair Value
Outstanding – December 31, 2015	36,690		$	18.70
Granted	31,466		33.68
Vested *	(25,207	)	23.58
Forfeited	—		—
Outstanding – December 31, 2016	42,949		$	26.80
Granted	9,240		57.75
Vested *	(20,514	)	29.87
Forfeited	(755	)	16.50
Outstanding – December 31, 2017	30,920		$	34.26
Granted	18,256		52.55
Vested *	(19,661	)	43.58
Forfeited	(3	)	16.50
Outstanding – December 31, 2018	29,512		$	39.37

*The terms of the restricted stock agreements permit the surrender of shares to the Company upon vesting in order to satisfy applicable tax withholding at the minimum statutory withholding rate, and accordingly 3,948 shares, 5,266 shares, and 7,851 shares were surrendered during 2018, 2017, and 2016, respectively.

The Company recognized $4.7 million, $3.1 million and $1.6 million of stock-based compensation expense (included in personnel on the consolidated statements of income) during the years ended December 31, 2018, 2017, and 2016, respectively, associated with its common stock awards granted to officers and employees. In addition, during 2018, the Company recognized approximately $0.2 million of director expense (included in other expense on the consolidated statements of income) for a total restricted stock grant of 3,510 shares with immediate vesting to directors. As of December 31, 2018, there was approximately $12.9 million of unrecognized compensation cost related to equity award grants. The cost is expected to be recognized over the remaining vesting period of approximately three years. The Company recognized a tax benefit of approximately $0.2 million and $1.9 million for the years ended December 31, 2018 and 2017, respectively, for the tax impact of stock option exercises and vesting of restricted stock.