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Note 21: Stock Compensation Plans

12 Months Ended

Dec. 31, 2017

The Company established the 2003 Stock Option and Incentive Plan (the “2003 Plan”) for employees and directors of the Company and its subsidiaries. Under the plan, stock options or other awards could be granted with respect to 598,224 shares of common stock. On May 15, 2013, the Company’s stockholders approved the Great Southern Bancorp, Inc. 2013 Equity Incentive Plan (the “2013 Plan”). Upon the stockholders’ approval of the 2013 Plan, the Company’s 2003 Plan was frozen. As a result, no new stock options or other awards may be granted under the 2003 Plan; however, existing outstanding awards under the 2003 Plan were not affected. At December 31, 2017, 126,042 options were outstanding under the 2003 Plan.

The 2013 Plan provides for the grant from time to time to directors, emeritus directors, officers, employees and advisory directors of stock options, stock appreciation rights and restricted stock awards. The number of shares of Common Stock available for awards under the 2013 Plan is 700,000, all of which may be utilized for stock options and stock appreciation rights and no more than 100,000 of which may be utilized for restricted stock awards. At December 31, 2017, 556,757 options were outstanding under the 2013 Plan.

Stock options may be either incentive stock options or nonqualified stock options, and the option price must be at least equal to the fair value of the Company’s common stock on the date of grant. Options generally are granted for a 10 year term and generally become exercisable in four cumulative annual installments of 25% commencing two years from the date of grant. The Stock Option Committee may accelerate a participant’s right to purchase shares under the plan.

Stock awards may be granted to key officers and employees upon terms and conditions determined solely at the discretion of the Stock Option Committee.

The table below summarizes transactions under the Company’s stock option plans:

			Weighted
	Available to Grant	Shares Under Option	Average Exercise Price

Balance, January 1, 2015	446,800	661,098	$ 26.560
Granted from 2013 plan	(129,350)	129,350	49.199
Exercised	--	(134,263)	25.403
Forfeited from terminated plan(s)	--	(8,453)	24.941
Forfeited from current plan(s)	14,000	(14,000)	33.389

Balance, December 31, 2015	331,450	633,732	31.297
Granted from 2013 plan	(131,000)	131,000	41.228
Exercised	--	(81,812)	26.472
Forfeited from terminated plan(s)	--	(2,692)	22.654
Forfeited from current plan(s)	19,025	(19,025)	39.123

Balance, December 31, 2016	219,475	661,203	33.672
Granted from 2013 Plan	(157,800)	157,800	52.118
Exercised	--	(119,692)	27.352
Forfeited from terminated plan(s)	--	(675)	24.690
Forfeited from current plan(s)	15,837	(15,837)	41.916

Balance, December 31, 2017	77,512	682,799	$ 38.860

The Company’s stock option grants contain terms that provide for a graded vesting schedule whereby portions of the options vest in increments over the requisite service period. These options typically vest one-fourth at the end of years two, three, four and five from the grant date. As provided for under FASB ASC 718, the Company has elected to recognize compensation expense for options with graded vesting schedules on a straight-line basis over the requisite service period for the entire option grant. In addition, ASC 718 requires companies to recognize compensation expense based on the estimated number of stock options for which service is expected to be rendered. The Company’s historical forfeitures of its share-based awards have not been material.

The fair value of each option award is estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions for the years ended December 31, 2017, 2016 and 2015:

	2017	2016	2015

Expected dividends per share	$0.95	$0.88	$0.88
Risk-free interest rate	2.03%	1.27%	1.66%
Expected life of options	5 years	5 years	5 years
Expected volatility	23.49%	22.08%	24.42%
Weighted average fair value of
options granted during year	$10.04	$6.59	$9.59

Expected volatilities are based on the historical volatility of the Company’s stock, based on the monthly closing stock price. The expected term of options granted is based on actual historical exercise behavior of all employees and directors and approximates the graded vesting period of the options. Expected dividends are based on the annualized dividends declared at the time of the option grant. The risk-free interest rate is based on the five-year treasury rate on the grant date of the options.

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

			Weighted
		Weighted	Average
		Average	Remaining
		Exercise	Contractual
	Options	Price	Term

Options outstanding, January 1, 2017	661,203	$33.672	7.23 years
Granted	157,800	52.118
Exercised	(119,692)	27.352
Forfeited	(16,512)	41.212
Options outstanding, December 31, 2017	682,799	38.860	7.38 years

Options exercisable, December 31, 2017	240,862	27.884	5.20 years

For the years ended December 31, 2017, 2016 and 2015, options granted were 157,800, 131,000, and 129,350, respectively. The total intrinsic value (amount by which the fair value of the underlying stock exceeds the exercise price of an option on exercise date) of options exercised during the years ended December 31, 2017, 2016 and 2015, was $3.0 million, $1.4 million and $2.3 million, respectively. Cash received from the exercise of options for the years ended December 31, 2017, 2016 and 2015, was $3.3 million, $2.1 million and $3.4 million, respectively. The actual tax benefit realized for the tax deductions from option exercises totaled $2.7 million, $1.3 million and $2.1 million for the years ended December 31, 2017, 2016 and 2015, respectively.

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

		Weighted	Weighted
		Average	Average
		Exercise	Grant Date
	Options	Price	Fair Value

Nonvested options, January 1, 2017	413,283	$39.253	$6.631
Granted	157,800	52.118	10.041
Vested this period	(112,659)	35.056	6.022
Nonvested options forfeited	(16,487)	41.242	7.229

Nonvested options, December 31, 2017	441,937	44.842	7.981

At December 31, 2017, there was $3.3 million of total unrecognized compensation cost related to nonvested options granted under the Company’s plans. This compensation cost is expected to be recognized through 2022, with the majority of this expense recognized in 2018 and 2019.

The following table further summarizes information about stock options outstanding at December 31, 2017:

	Options Outstanding
		Weighted		Options Exercisable
		Average	Weighted		Weighted
		Remaining	Average		Average
Range of	Number	Contractual	Exercise	Number	Exercise
Exercise Prices	Outstanding	Term	Price	Exercisable	Price

$8.360 to $19.530	48,152	3.56 years	$17.884	48,152	$17.884
$21.320 to $24.820	77,890	4.09 years	23.760	77,740	23.760
$26.640 to $29.640	73,833	5.95 years	29.491	50,374	29.493
$32.590 to $38.610	109,313	6.86 years	33.029	41,902	32.751
$41.300 to $47.800	121,200	8.80 years	41.370	325	47.800
$50.710 to $52.200	252,411	9.07 years	51.582	22,369	50.710

	682,799	7.38 years	38.860	240,862	27.884