Stock-Based Compensation

For the

three

months ended

March

31,

2017

and

2016,

the Company’s net income, as reported, includes

$3.1

million and

$3.0

million, respectively, of stock-based compensation costs and

$1.0

million of income tax benefits related to the stock-based compensation plans in each of the periods. During the

three

months ended

March

31,

2017

and

2016,

the Company granted

276,900

and

337,175

restricted stock units, respectively. The Company has

not

granted stock options since

2009.

March

31,

2017,

the Company had

5,600

stock options, all

100%

vested, outstanding.

The Company uses the fair value of the common stock on the date of award to measure compensation cost for restricted stock unit awards. Compensation cost is recognized over the vesting period of the award using the straight line method.

The following table summarizes the Company’s restricted stock unit (“RSU”) awards at or for the

three

months ended

March

31,

2017:

	Shares			Weighted-Average Grant-Date Fair Value

Non-vested at December 31, 2016		488,779		$	18.99
Granted		276,900			28.21
Vested		(242,917	)		21.93
Forfeited		(14,680	)		21.77
Non-vested at March 31, 2017		508,082		$	22.53

Vested but unissued at March 31, 2017		270,017		$	22.33

As of

March

31,

2017,

there was

$10.7

million of total unrecognized compensation cost related to RSU awards granted. That cost is expected to be recognized over a weighted-average period of

3.5

years. The total fair value of awards vested for the

three

months ended

March

31,

2017

and

2016

were

$7.0

million and

$4.8

million, respectively. The vested but unissued RSU awards consist of awards made to employees and directors who are eligible for retirement. According to the terms of these awards, which provide for vesting upon retirement, these employees and directors have no risk of forfeiture. These shares will be issued at the original contractual vesting and settlement dates.

Cash proceeds, fair value received, tax benefits, and intrinsic value related to stock options exercised during the

three

months ended

March

31,

2017

and

2016

are provided in the following table:

	For the three months ended March 31,
(In thousands)	2017		2016
Proceeds from stock options exercised	$	-	$	19
Fair value of shares received upon exercised of stock options		-		328
Tax expense related to stock options exercised		-		(16	)
Intrinsic value of stock options exercised		-		43

Phantom Stock Plan:

The Company maintains a non-qualified phantom stock plan as a supplement to its profit sharing plan for officers who have achieved the designated level and completed

one

year of service. However, certain officers who have not reached the designated level but were already participants, remain eligible to participate in the Plan. Awards are made under this plan on certain compensation not eligible for contributions made under the profit sharing plan, due to the terms of the profit sharing plan and the Internal Revenue Code. Employees receive awards under this plan proportionate to the amount they would have received under the profit sharing plan, but for limits imposed by the profit sharing plan and the Internal Revenue Code. The awards are made as cash awards, and then converted to common stock equivalents (phantom shares) at the then current fair value of the Company’s common stock. Dividends are credited to each employee’s account in the form of additional phantom shares each time the Company pays a dividend on its common stock. In the event of a change of control (as defined in this plan), an employee’s interest is converted to a fixed dollar amount and deemed to be invested in the same manner as his interest in the Bank’s non-qualified deferred compensation plan. Employees vest under this plan

20%

per year for the

first

years of employment and are

100%

vested thereafter. Employees also become

100%

vested upon a change of control. Employees receive their vested interest in this plan in the form of a cash lump sum payment or installments, as elected by the employee, after termination of employment. The Company adjusts its liability under this plan to the fair value of the shares at the end of each period.

The following table summarizes the Phantom Stock Plan at or for the

three

months ended

March

31,

2017:

Phantom Stock Plan	Shares			Fair Value

Outstanding at December 31, 2016		89,339		$	29.39
Granted		6,743			27.17
Forfeited		-			-
Distributions		(198	)		28.93
Outstanding at March 31, 2017		95,884		$	26.87
Vested at March 31, 2017		95,462		$	26.87

The Company recorded stock-based compensation (benefit) expense for the Phantom Stock Plan of

($0.2

million) and

$29,000

for the

three

months ended

March

31,

2017

and

2016,

respectively. The total fair value of the distributions from the Phantom Stock Plan was

$6,000

and

$28,000

for the

three

months ended

March

31,

2017

and

2016,

respectively.