Employee Benefit Plans

9 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement, Noncash Expense [Abstract]

Stock Options

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


	Nine months ended September 30,
	2020			2019
	Options	Weighted-Average Exercise Price		Options	Weighted-Average Exercise Price
Outstanding at January 1	46,251	$	52.74	57,972	$	51.15
Exercised	(4,921)	45.17		(11,721)	44.87
Outstanding at September 30	41,330	$	53.64	46,251	$	52.74

Exerciseable at September 30	21,459	$	50.45	8,063	$	44.48

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,
	2020		2019
Proceeds from stock option exercises	$	223	$	526
Intrinsic value of stock options exercised	93		368

Stock-based compensation expense associated with stock options	$	47	$	92

At period-end:	September 30, 2020
Unrecognized stock-based compensation expense associated with stock options	$	37
Weighted average period (in years) in which the above amount is expected to be
recognized	1.0

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, 2020 and 2019, 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, 2020, 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 and performance share units that have performance-based criteria, management has evaluated those criteria and has determined that, as of September 30, 2020, 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,
	2020			2019
	Restricted Awards	Average Market Price at Grant		Restricted Awards	Average Market Price at Grant
Outstanding at January 1	148,083	$	62.62	152,692	$	51.85
Granted	38,603	67.15		31,006	79.86
Vested	(29,775)	47.72		(45,007)	39.81
Outstanding at September 30	156,911	$	66.56	138,691	$	61.98

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


	Three months ended September 30				Nine months ended September 30,
	2020		2019		2020		2019
Stock-based compensation expense associated with restricted shares	$	708	$	499	$	2,018	$	1,434

At period-end:					September 30, 2020
Unrecognized stock-based compensation expense associated with restricted shares					$	5,592
Weighted average period (in years) in which the above amount is expected to be recognized					3.1

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, 2020 and 2019, 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,
	2020		2019		2020		2019
Components of net periodic cost:
Interest cost	$	112	$	242	$	336	$	522
Expected return on plan assets	(203)		(370)		(611)		(798)
Net amortization and deferral	272		396		817		855
Net Periodic Pension Cost	$	181	$	268	$	542	$	579