Employee Benefit Plans

9 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement, Noncash Expense [Abstract]

Employee Benefit Plans

Employee Benefit Plans

Stock Options

A summary of the Company’s stock option activity and related information is presented below:

	Nine months ended September 30,
	2019				2018
	Options		Weighted-Average Exercise Price		Options		Weighted-Average Exercise Price
Outstanding at January 1	57,972		$	51.15	87,605		$	47.15
Exercised	(11,721	)	44.87		(29,133	)	39.47
Outstanding at September 30	46,251		$	52.74	58,472		$	50.97
Exerciseable at September 30	8,063		$	44.48	3,197		$	42.82

Information regarding stock option exercises and stock-based compensation expense associated with stock options is provided in the following table (in thousands):    

	Nine months ended September 30,
	2019		2018
Proceeds from stock option exercises	$	526	$	1,149
Intrinsic value of stock options exercised	368		944
Stock-based compensation expense associated with stock options	$	92	$	137
At period-end:	September 30, 2019
Unrecognized stock-based compensation expense associated with stock options	$	112
Weighted average period (in years) in which the above amount is expected to be
recognized	1.6

Shares issued in connection with stock option exercises are issued from available treasury shares. If no treasury shares are available, new shares would be issued from available authorized shares. During the nine months ended September 30, 2019 and 2018, all shares issued in connection with stock option exercises were issued from available treasury stock. For the stock options that have performance-based criteria, management has evaluated those criteria and has determined that, as of September 30, 2019, the criteria were probable of being met.

Restricted Shares, Restricted Stock Units, Performance Share Units

The Company records compensation expense with respect to restricted shares, restricted stock units and performance share units in an amount equal to the fair value of the common stock covered by each award on the date of grant. These awards become fully vested after various periods of continued employment from the respective dates of grant. The Company is entitled

to an income tax deduction in an amount equal to the taxable income reported by the holders of the restricted shares when the restrictions are released and the shares are issued. Compensation is being charged to expense over the respective vesting periods.

Restricted shares are forfeited if the awardee officer or employee terminates his employment with the Company prior to the lapsing of restrictions. The Company records forfeitures of restricted stock as treasury share repurchases and any compensation cost previously recognized is reversed in the period of forfeiture.  Recipients of restricted shares do not pay any cash consideration to the Company for the shares, and, except for restricted stock units and performance share units, have the right to vote all shares subject to such grant and receive all dividends with respect to such shares, whether or not the shares have vested.  For restricted shares that have performance-based criteria, management has evaluated those criteria and has determined that, as of September 30, 2019, the criteria were probable of being met.

A summary of the Company’s restricted shares activity and related information is presented below:

	Nine months ended September 30,
	2019				2018
	Restricted Awards		Average Market Price at Grant		Restricted Awards		Average Market Price at Grant
Outstanding at January 1	152,692		$	51.85	170,033		$	44.34
Granted	31,006		79.86		28,363		69.94
Vested	(45,007	)	39.81		(48,104	)	37.31
Outstanding at September 30	138,691		$	61.98	150,292		$	51.42

Information regarding stock-based compensation associated with restricted shares is provided in the following table (in thousands):

	Nine months ended September 30,
	2019		2018
Stock-based compensation expense associated with restricted shares	$	1,434	$	1,201
At period-end:	September 30, 2019
Unrecognized stock-based compensation expense associated with restricted shares	$	4,845
Weighted average period (in years) in which the above amount is expected to be
recognized	3.3

Shares issued in conjunction with restricted stock awards are issued from available treasury shares. If no treasury shares are available, new shares would be issued from available authorized shares. During the nine months ended September 30, 2019 and 2018, all shares issued in connection with restricted stock awards were issued from available treasury stock.

Benefit Plans

The Company provides retirement benefits to its employees through the City Holding Company 401(k) Plan and Trust (the “401(k) Plan”), which is intended to be compliant with Employee Retirement Income Security Act (ERISA) section 404(c). The Company also maintains a frozen defined benefit pension plan (the “Defined Benefit Plan”), which was inherited from the Company's acquisition of the plan sponsor (Horizon Bancorp, Inc.).

The following table presents the components of the Company's net periodic benefit cost, which is included in the line item "Other Expenses" in the consolidated statements of income, (in thousands):

	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Components of net periodic cost:
Interest cost	$	242		$	147		$	522		$	442
Expected return on plan assets	(370		)	(270		)	(798		)	(810		)
Net amortization and deferral	396			218			855			655
Settlement	$	—		$	—		$	—		$	151
Net Periodic Pension Cost	$	268		$	95		$	579		$	438