Quarterly report pursuant to Section 13 or 15(d)

Share-Based Payments

v3.8.0.1
Share-Based Payments
9 Months Ended
Sep. 30, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Share-Based Payments
Share-Based Payments

The Company’s general practice has been to make a single annual grant of share-based compensation to key employees and to make other employee grants only in connection with new employment or promotions.  Forms of share-based compensation granted to employees by the Company include stock options, non-vested shares of common stock (“non-vested share”), and performance shares.  The Company also typically makes a single annual grant of non-vested shares to non-employee directors in conjunction with the annual election of non-employee directors to the Board of Directors.  Share-based compensation is based on the grant date fair value of the instrument and is recognized ratably over the requisite service period, or vesting period. All share-based compensation expense is recognized in salaries, wages and employee benefits.

Employee Activity - Stock Options
 
Stock option grants to employees generally expire seven years from the grant date and typically vest ratably over a three-year period.  The Company used the Black-Scholes option-pricing model to estimate the grant-date fair value of options granted.  The weighted-average fair value of options granted and assumptions used to estimate their fair value during the nine months ended September 30, 2017 and 2016 were as follows:

 
 
 
 

Three months ended

September 30,
2017

September 30,
2016
Expected dividend yield
1.3
%

%
Expected stock price volatility
28.7
%

%
Weighted average risk-free interest rate
2.0
%

%
Expected life of options (years)
6.0


0

Weighted average grant date fair value
$
14


$

 
 
 
 

Nine months ended

September 30,
2017

September 30,
2016
Expected dividend yield
1.3
%

1.0
%
Expected stock price volatility
28.7
%

29.0
%
Weighted average risk-free interest rate
2.0
%

1.3
%
Expected life of options (years)
6.0


6.0

Weighted average grant date fair value
$
13


$
12


The following tables summarize the Company’s employee stock option activity and related information:


Three months ended September 30, 2017







Weighted-



Weighted-

Aggregate

Average



Average

Intrinsic

Remaining

Options

Exercise

Value

Contractual

(000)

Price

(000)

Term
Outstanding at June 30, 2017
507


$
44





Granted
5


54





Exercised
(18
)

41





Forfeited
(22
)

47





Outstanding at September 30, 2017
472


$
44


$
3,963


4.5
Exercisable at September 30, 2017
255


$
42


$
2,671


3.3
 

Three months ended

September 30,
2017

September 30,
2016
Share-based compensation for options
$
294


$
377

Tax benefit for option compensation
$
105


$
140

Unrecognized compensation cost for options, net of estimated forfeitures
$
1,909


$
2,036

Weighted average period over which unrecognized compensation will be recognized (years)
1.9



 
 
 
 
 
 
 
 

Nine months ended September 30, 2017







Weighted-



Weighted-

Aggregate

Average



Average

Intrinsic

Remaining

Options

Exercise

Value

Contractual

(000)

Price

(000)

Term
Outstanding at December 31, 2016
564


$
41





Granted
123


48





Exercised
(169
)

34





Forfeited
(46
)

46





Outstanding at September 30, 2017
472


$
44


$
3,963


4.5
Exercisable at September 30, 2017
255


$
42


$
2,671


3.3

 
 
 
 

Nine months ended

September 30,
2017

September 30,
2016
Share-based compensation for options
$
993


$
1,101

Tax benefit for option compensation
$
354


$
407

Unrecognized compensation cost for options, net of estimated forfeitures
$
1,909


$
2,036

Weighted average period over which unrecognized compensation will be recognized (years)
1.9

 
 

Employee Activity - Non-vested Shares

Non-vested share grants to employees vest ratably over a three-year period.  The non-vested shares’ fair values were estimated using closing market prices on the day of grant. The following tables summarize the Company’s employee non-vested share activity and related information:


Three months ended September 30, 2017



Weighted-

Aggregate

Non-vested

Average

Grant Date

Shares

Grant Date

Fair Value

(000)

Fair Value

(000)
Outstanding and non-vested at June 30, 2017
232


$
47



Granted
1


54



Vested





Forfeited
(4
)

47



Outstanding and non-vested at September 30, 2017
229


$
47


$
10,658



Three months ended

September 30,
2017

September 30,
2016
Share-based compensation for non-vested shares
$
1,243


$
1,176

Tax benefit for non-vested share compensation
$
444


$
434

Unrecognized compensation cost for non-vested shares, net of estimated forfeitures
$
7,410


$
7,147

Weighted average period over which unrecognized compensation will be recognized (years)
1.9




 
 
 
 
 
 

Nine months ended September 30, 2017



Weighted-

Aggregate

Non-vested

Average

Grant Date

Shares

Grant Date

Fair Value

(000)

Fair Value

(000)
Outstanding and non-vested at December 31, 2016
222


$
45



Granted
127


48



Vested
(104
)

45



Forfeited
(16
)

47



Outstanding and non-vested at September 30, 2017
229


$
47


$
10,658

 
 
 
 

Nine months ended

September 30,
2017

September 30,
2016
Share-based compensation for non-vested shares
$
3,762


$
3,434

Tax benefit for non-vested share compensation
$
1,343


$
1,270

Unrecognized compensation cost for non-vested shares, net of estimated forfeitures
$
7,410


$
7,147

Weighted average period over which unrecognized compensation will be recognized (years)
1.9

 
 

Employee Activity - Performance Shares

The Company annually grants performance shares to key employees.  Under the terms of the performance share agreements, following the end of a three-year performance period, the Company will issue to the employees a calculated number of common stock shares based on the three year performance of the Company’s total shareholder return as compared to the total shareholder return of a selected peer group.  No shares may be issued if the Company's total shareholder return outperforms 30% or less of the peer group, but the number of shares issued may be doubled if the Company's total shareholder return performs better than 90% of the peer group.  The fair value of the performance shares was estimated using a Monte Carlo simulation. The weighted average assumptions used in the Monte Carlo estimate were as follows:


Nine months ended

September 30,
2017

September 30,
2016
Expected stock price volatility
24.7
%

22.3
%
Weighted average risk-free interest rate
1.4
%

0.8
%

The following tables summarize the Company’s employee performance share activity, assuming median share awards, and related information:

Three months ended September 30, 2017



Weighted-

Aggregate

Performance

Average

Grant Date

Shares

Grant Date

Fair Value

(000)

Fair Value

(000)
Outstanding and non-vested at June 30, 2017
72


$
57



Granted
1


54



Forfeited
(4
)

$
57



Outstanding and non-vested at September 30, 2017
69


$
57


$
3,956



Three months ended

September 30,
2017

September 30,
2016
Share-based compensation for performance shares
$
249


$
367

Tax benefit for performance share compensation
$
88


$
136

Unrecognized compensation cost for performance shares, net of estimated forfeitures
$
1,740


$
2,076

Weighted average period over which unrecognized compensation will be recognized (years)
1.8




 
 
 
 
 
 

Nine months ended September 30, 2017



Weighted-

Aggregate

Performance

Average

Grant Date

Shares

Grant Date

Fair Value

(000)

Fair Value

(000)
Outstanding and non-vested at December 31, 2016
80


$
55



Granted
26


56



Additional shares awarded based on performance





Vested





Forfeited
(37
)

51



Outstanding and non-vested at September 30, 2017
69


$
57


$
3,956

 
 
 
 

Nine months ended

September 30,
2017

September 30,
2016
Share-based compensation for performance shares
$
689


$
1,080

Tax benefit for performance share compensation
$
246


$
400

Unrecognized compensation cost for performance shares, net of estimated forfeitures
$
1,740


$
2,076

Weighted average period over which unrecognized compensation will be recognized (years)
1.8

 
 


Employee Activity - Employee Stock Purchase Plan
Under the 2005 Employee Stock Purchase Plan (the “ESPP”), which has been approved by shareholders, the Company is authorized to issue up to a remaining 376,625 shares of common stock to employees of the Company. These shares may be issued at a price equal to 90% of the lesser of the market value on the first day or the last day of each six month purchase period. Common stock purchases are paid for through periodic payroll deductions and/or up to two large lump sum contributions. For the nine months ended September 30, 2017, participants under the plan purchased 5,188 shares at an average price of $43.59 per share. For the nine months ended September 30, 2016, participants under the plan purchased 5,592 shares at an average price of $38.50 per share. The weighted-average fair value of each purchase right under the ESPP granted for the nine months ended September 30, 2017, which is equal to the discount from the market value of the common stock at the end of each six month purchase period, was $9.69 per share. The weighted-average fair value of each purchase right under the ESPP granted for the nine months ended September 30, 2016, which is equal to the discount from the market value of the common stock at the end of each six month purchase period, was $6.03 per share. Share-based compensation expense of $51 and $34 was recognized during the nine months ended September 30, 2017 and 2016, respectively.

Non-employee Director Activity - Non-vested Shares

Grants of non-vested shares to non-employee directors vest ratably over the elected term to the Board of Directors, or approximately one year.  The following tables summarize the Company’s non-employee non-vested share activity and related information:

Three months ended September 30, 2017



Weighted-

Aggregate

Non-vested

Average

Grant Date

Shares

Grant Date

Fair Value

(000)

Fair Value

(000)
Outstanding and non-vested at June 30, 2017
10


$
51



Granted
4


54



Vested





Forfeited
(1
)

$
51



Outstanding and non-vested at September 30, 2017
13


$
52


$
656



Three months ended

September 30,
2017

September 30,
2016
Share-based compensation for non-vested shares
$
153


$
173

Tax benefit for non-vested share compensation
$
54


$
64

Unrecognized compensation cost for non-vested shares, net of estimated forfeitures
$
430


$
419

Weighted average period over which unrecognized compensation will be recognized (years)
0.6




 
 
 
 
 
 

Nine months ended September 30, 2017



Weighted-

Aggregate

Non-vested

Average

Grant Date

Shares

Grant Date

Fair Value

(000)

Fair Value

(000)
Outstanding and non-vested at December 31, 2016
16


$
44



Granted
14


52



Vested
(16
)

44



Forfeited
(1
)

51



Outstanding and non-vested at September 30, 2017
13


$
52


$
656


 
 
 
 

Nine months ended

September 30,
2017

September 30,
2016
Share-based compensation for non-vested shares
$
470


$
555

Tax benefit for non-vested share compensation
$
167


$
198

Unrecognized compensation cost for non-vested shares, net of estimated forfeitures
$
430


$
419

Weighted average period over which unrecognized compensation will be recognized (years)
0.6