Share-Based Compensation

The Company has share-based compensation plans which allow grants of stock options, restricted stock, stock appreciation rights, and restricted stock units to its employees and non-employee directors. The Company’s employee stock option plans are shareholder approved and administered by the Human Resources and Compensation Committee of the Board of Directors. Stock options provide grantees the option to purchase shares of the Parent’s common stock at a specified exercise price and, generally, expire 10 years from the date of grant. Stock option grants include incentive and non-qualified stock options whose vesting may be subject to one or more criteria, including employment or achievement of Company performance measures. Stock option exercise prices were equal to the quoted market price of the Parent’s common stock on the date of grant. Restricted stock provides grantees with rights to shares of common stock upon completion of one or more criteria, including service period, performance or other conditions as established by the Compensation Committee, such as vesting tied to the Company’s financial performances relative to the peer group or achievement of an absolute financial performance target. During the restriction period, all shares are considered outstanding and dividends are paid on the restricted stock. Generally, restricted stock vests over periods ranging from one to four years from the date of grant. Restricted stock and dividends may be forfeited if an employee terminates prior to vesting.

As of December 31, 2017, total shares authorized under the plans were 2.1 million shares, of which 1.9 million shares were available for future grants.

The Company recognizes compensation expense, measured as the fair value of the share-based award on the date of grant, on a straight-line basis over the requisite service period. Share-based compensation is recorded in the statements of income as a component of salaries and benefits for employees and as a component of other noninterest expense for non-employee directors, with a corresponding increase to capital surplus in shareholders’ equity. For the years ended December 31, 2017, 2016, and 2015, compensation expense and the related income tax benefit recognized for stock options and restricted stock were as follows:



(dollars in thousands)	2017		2016		2015
Compensation Expense	$	7,369	$	6,787	$	7,689
Income Tax Benefit	2,910		2,680		3,036

Restricted Stock

As of December 31, 2017, unrecognized compensation expense related to unvested restricted stock was $9.8 million. The unrecognized compensation expense is expected to be recognized over a weighted average period of 1.83 years.

The following table presents the activity for restricted stock:



	Number of Shares		Weighted Average Grant Date Fair Value			Grant Date Fair Value of Restricted Stock that Vested During the Year (in thousands)
Unvested as of December 31, 2014	263,446			$	53.04
Granted	116,331			57.31
Vested	(108,949	)		52.47			$	5,759
Forfeited	(2,015	)		54.17
Unvested as of December 31, 2015	268,813			$	55.92
Granted	121,495			64.40
Vested	(105,891	)		53.46			$	5,661
Forfeited	(13,894	)		58.14
Unvested as of December 31, 2016	270,523			$	60.58
Granted	124,460			84.53
Vested	(52,822	)		60.06			$	4,493
Forfeited	(22,058	)		69.46
Unvested as of December 31, 2017 ¹	320,103			$	69.36

¹ As of December 31, 2017, 31,397 shares were unvested from service-based grants.

Restricted Stock Units

There were no RSUs granted during 2017. During 2016, and 2015, the Company granted RSUs payable solely in cash. The RSUs vest over periods ranging from three to four years from the date of grant and are subject to forfeiture until performance and employment targets are achieved. Upon vesting, the RSUs are converted to cash based on the closing stock price on the vesting date. Total recognized compensation expense related to the RSUs was $3.4 million, $5.9 million, and $3.3 million for the years ended December 31, 2017, 2016, and 2015, respectively.

The following table presents the activity for RSU:



	Number of Units		Weighted Average Grant Date Fair Value			Fair Value of Restricted Stock Unit that Vested During the Year (in thousands)
Balance as of December 31, 2014	105,405			$	55.17
Granted	61,751			56.68
Vested	(31,651	)		55.17			$	1,940
Balance as of December 31, 2015	135,505			$	55.86
Granted	58,541			63.92
Vested	(31,660	)		55.17			$	1,897
Forfeited	(7,554	)		56.08
Balance as of December 31, 2016	154,832			$	59.04
Vested	(29,281	)		58.74			$	2,516
Forfeited	(9,062	)		60.17
Balance as of December 31, 2017	116,489			$	60.22

Stock Options

There were no stock options granted for the years ended December 31, 2017, 2016, and 2015. All stock options granted were fully vested prior to December 31, 2015. The Company reissues treasury stock to satisfy stock option exercises.

The following table presents the activity related to stock options under all plans for the year ended December 31, 2017:



	Stock Options		Weighted Average Exercise Price			Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Stock Options Outstanding as of January 1, 2017	478,889			$	45.14
Exercised	(166,838	)		44.96
Forfeited	(8,499	)		44.38
Stock Options Outstanding as of December 31, 2017	303,552			45.26		4.0		$	12,277
Stock Options Vested and Exercisable as of December 31, 2017	303,552			45.26		4.0		12,277

The following summarizes certain stock option activity of the Company for the years ended December 31, 2017, 2016, and 2015:



(dollars in thousands)	2017		2016		2015
Intrinsic Value of Stock Options Exercised	$	5,991	$	1,990	$	2,754
Cash Received from Stock Options Exercised	7,502		3,546		9,704
Tax Benefits Realized from Stock Options Exercised	2,003		384		330