Quarterly report pursuant to Section 13 or 15(d)

Share-Based Payments

v2.4.0.8
Share-Based Payments
3 Months Ended
Mar. 31, 2014
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, net of estimated forfeitures, ratably over the requisite service period, or vesting period. The Company estimates forfeitures based upon historical experience.  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 calculate their fair value during the three months ended March 31, 2014 and 2013 were as follows:


Three months ended

March 31,
2014

March 31,
2013
Expected dividend yield
1.2
%

1.2
%
Expected stock price volatility
40.6
%

43.7
%
Weighted average risk-free interest rate
1.6
%

0.9
%
Expected life of options (years)
5.4


5.3

Weighted average grant date fair value
$
15


$
13




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


Three months ended March 31, 2014







Weighted-



Weighted-

Aggregate

Average



Average

Intrinsic

Remaining

Options

Exercise

Value

Contractual

(000)

Price

(000)

Term
Outstanding at December 31, 2013
1,732


$
27





Granted
91


43





Exercised
(341
)

28





Forfeited
(8
)

38





Outstanding at March 31, 2014
1,474


$
28


$
23,812


2.8
Exercisable at March 31, 2014
1,277


$
26


$
22,948


2.2
 

Three months ended

March 31,
2014

March 31,
2013
Shared-based compensation for options
$
314


$
424

Tax benefit for option compensation
120


136

Unrecognized compensation cost for options, net of estimated forfeitures
2,561


2,488



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 March 31, 2014



Weighted-

Aggregate

Non-vested

Average

Grant Date

Shares

Grant Date

Fair Value

(000)

Fair Value

(000)
Outstanding and non-vested at December 31, 2013
186


$
35



Granted
97


42



Vested
(93
)

43



Forfeited





Outstanding and non-vested at March 31, 2014
190


$
40


$
7,559



Three months ended

March 31,
2014

March 31,
2013
Shared-based compensation for non-vested shares
$
925


$
743

Tax benefit for non-vested share compensation
352


284

Unrecognized compensation cost for non-vested shares, net of estimated forfeitures
6,982


6,398


Employee Activity - Performance Shares

The Company annually grants performance shares to key employees.  Under the terms of the performance share agreements, on the third anniversary of the grant date, the Company will issue to the employees a calculated number of common stock shares based on the three year performance of the Company’s common stock share price as compared to the share price performance of a selected peer group.  No shares may be issued if the Company share price performance outperforms 30% or less of the peer group, but the number of shares issued may be doubled if the Company share price 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 calculation were as follows:


Three months ended

March 31,
2014

March 31,
2013
Expected stock price volatility
32.5
%

34.5
%
Weighted average risk-free interest rate
0.7
%

0.4
%

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

Three months ended March 31, 2014



Weighted-

Aggregate

Performance

Average

Grant Date

Shares

Grant Date

Fair Value

(000)

Fair Value

(000)
Outstanding and non-vested at December 31, 2013
88


$
37



Granted
23


48



Additional shares awarded based on performance
19


30



Vested
(56
)

30



Outstanding and non-vested at March 31, 2014
74


$
44


$
3,279



Three months ended

March 31,
2014

March 31,
2013
Shared-based compensation for performance shares
$
275


$
233

Tax benefit for performance share compensation
105


89

Unrecognized compensation cost for performance shares, net of estimated forfeitures
2,048


2,012





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 one year.  The following tables summarize the Company’s non-employee non-vested share activity and related information:

Three months ended March 31, 2014



Weighted-

Aggregate

Non-vested

Average

Grant Date

Shares

Grant Date

Fair Value

(000)

Fair Value

(000)
Outstanding and non-vested at December 31, 2013
15


$
38



Granted





Vested





Outstanding and non-vested at March 31, 2014
15


$
38


$
560



Three months ended

March 31,
2014

March 31,
2013
Shared-based compensation for non-vested shares
$
138


$
157

Tax benefit for non-vested share compensation
53


60

Unrecognized compensation cost for non-vested shares, net of estimated forfeitures
57


67


Non-employee Director Activity - Stock Options

In addition to the above activity, each May from 1995 to 2005 options were granted to the non-employee directors of the Company.  The options have terms of ten years and are fully exercisable.  At March 31, 2014, 15,000 options were outstanding and will expire May 2015.  At March 31, 2014, the weighted average exercise price per share and remaining contractual term for the outstanding options of non-employee directors were $26 and 1.2 years, respectively.