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. In February 2019, with subsequent shareholder approval, the 2011 Long-Term Incentive Plan was amended to increase the shares reserved for potential stock-based awards from 1,500,000 shares to 3,000,000 shares. At September 30, 2019, approximately 1.6 million shares were available for grant under these stock-based compensation plans.

A Black-Scholes model is utilized to estimate the fair value of stock option grants, while the market price of the Company’s stock at the date of grant is used to estimate the fair value of restricted stock awards. The weighted average assumptions used in the Black-Scholes model for valuing stock option grants were as follows.



	Nine Months Ended September 30,
	2019			2018
Dividend yield	—		%	—		%
Expected volatility	25		%	25		%
Risk-free interest rate	2.37		%	2.48		%
Expected average life	7 years			7 years
Weighted average per share fair value of options	$	19.23		$	17.60

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, 2018	1,581,699		$	40.77
Granted	15,000		59.55
Exercise of stock options *	(185,328	)	23.64
Forfeited	(3,538	)	27.43
Outstanding - September 30, 2019	1,407,833		$	43.25	7.0	$	32,829
Exercisable - September 30, 2019	644,033		$	39.28	6.5	$	17,577

* 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. For the nine months ended September 30, 2019, 70,068 such shares were surrendered to the Company.

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 for the nine months ended September 30, 2019 and 2018 was approximately $6.9 million and $1.8 million, respectively.

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



Restricted Stock	Weighted Average Grant Date Fair Value		Restricted Shares Outstanding
Outstanding - December 31, 2018	$	39.37	29,512
Granted	61.96		4,257
Vested *	45.05		(9,672	)
Forfeited	16.50		(408	)
Outstanding - September 30, 2019	$	41.50	23,689

* The terms of the restricted stock agreements permit the surrender of shares to the Company upon vesting in order to satisfy applicable tax withholding requirements at the minimum statutory withholding rate, and accordingly, 1,637 shares were surrendered during the nine months ended September 30, 2019.

The Company recognized approximately $3.4 million of stock-based compensation expense (included in personnel on the consolidated statements of income) for both the nine months ended September 30, 2019 and 2018, associated with its common stock awards granted to officers and employees. In addition, during 2019 the Company recognized approximately $0.3 million of director expense (included in other expense on the consolidated statements of income) for a total restricted stock grant of 4,257 shares with immediate vesting to non-employee directors. During 2018, the Company recognized approximately $0.2 million of director expense for a total restricted stock grant of 3,510 shares with immediate vesting to non-employee directors. As of September 30, 2019, there was approximately $9.9 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 $1.0 million and $0.2 million for the nine months ended September 30, 2019 and 2018, respectively, for the tax impact of stock option exercises and vesting of restricted stock.