Quarterly report pursuant to Section 13 or 15(d)

Share-Based Payments

v3.5.0.2
Share-Based Payments
6 Months Ended
Jun. 30, 2016
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 estimate their fair value during the six months ended June 30, 2016 and 2015 were as follows:

 
 
 
 
 
 
 
 

Six months ended

June 30,
2016

June 30,
2015
Expected dividend yield
1.0
%

1.0
%
Expected stock price volatility
29.0
%

33.9
%
Weighted average risk-free interest rate
1.3
%

1.6
%
Expected life of options (years)
6.0


6.1

Weighted average grant date fair value
$
12


$
16


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


Three months ended June 30, 2016







Weighted-



Weighted-

Aggregate

Average



Average

Intrinsic

Remaining

Options

Exercise

Value

Contractual

(000)

Price

(000)

Term
Outstanding at March 31, 2016
868


$
34





Granted







Exercised
(10
)

22





Forfeited
(3
)

38





Outstanding at June 30, 2016
855


$
34


$
9,014


3.1
Exercisable at June 30, 2016
623


$
30


$
9,097


2.0
 

Three months ended

June 30,
2016

June 30,
2015
Share-based compensation for options
$
375


$
342

Tax benefit for option compensation
$
140


$
132

Unrecognized compensation cost for options, net of estimated forfeitures
$
2,414


$
2,266

Weighted average period over which unrecognized compensation will be recognized (years)
2.0



 
 
 
 
 
 
 
 

Six months ended June 30, 2016







Weighted-



Weighted-

Aggregate

Average



Average

Intrinsic

Remaining

Options

Exercise

Value

Contractual

(000)

Price

(000)

Term
Outstanding at December 31, 2015
786


$
32





Granted
122


44





Exercised
(48
)

23





Forfeited
(5
)

38





Outstanding at June 30, 2016
855


$
34


$
9,014


3.1
Exercisable at June 30, 2016
623


$
30


$
9,097


2.0

 
 
 
 

Six months ended

June 30,
2016

June 30,
2015
Share-based compensation for options
$
723


$
678

Tax benefit for option compensation
$
269


$
261

Unrecognized compensation cost for options, net of estimated forfeitures
$
2,414


$
2,266

Weighted average period over which unrecognized compensation will be recognized (years)
2.0

 
 


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 June 30, 2016



Weighted-

Aggregate

Non-vested

Average

Grant Date

Shares

Grant Date

Fair Value

(000)

Fair Value

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


$
46



Granted
9


43



Vested
(1
)

37



Forfeited
(2
)

45



Outstanding and non-vested at June 30, 2016
228


$
45


$
10,363



Three months ended

June 30,
2016

June 30,
2015
Share-based compensation for non-vested shares
$
1,176


$
1,022

Tax benefit for non-vested share compensation
$
437


$
393

Unrecognized compensation cost for non-vested shares, net of estimated forfeitures
$
8,470


$
7,231

Weighted average period over which unrecognized compensation will be recognized (years)
2.1




 
 
 
 
 
 

Six months ended June 30, 2016



Weighted-

Aggregate

Non-vested

Average

Grant Date

Shares

Grant Date

Fair Value

(000)

Fair Value

(000)
Outstanding and non-vested at December 31, 2015
191


$
46



Granted
134


44



Vested
(93
)

44



Forfeited
(4
)

46



Outstanding and non-vested at June 30, 2016
228


$
45


$
10,363

 
 
 
 

Six months ended

June 30,
2016

June 30,
2015
Share-based compensation for non-vested shares
$
2,258


$
2,010

Tax benefit for non-vested share compensation
$
840


$
772

Unrecognized compensation cost for non-vested shares, net of estimated forfeitures
$
8,470


$
7,231

Weighted average period over which unrecognized compensation will be recognized (years)
2.1

 
 

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's share price performance outperforms 30% or less of the peer group, but the number of shares issued may be doubled if the Company's 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 estimate were as follows:


Six months ended

June 30,
2016

June 30,
2015
Expected stock price volatility
22.3
%

23.5
%
Weighted average risk-free interest rate
0.8
%

1.0
%

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

Three months ended June 30, 2016



Weighted-

Aggregate

Performance

Average

Grant Date

Shares

Grant Date

Fair Value

(000)

Fair Value

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


$
55



Granted





Additional shares awarded based on performance





Vested





Outstanding and non-vested at June 30, 2016
80


$
55


$
4,373



Three months ended

June 30,
2016

June 30,
2015
Share-based compensation for performance shares
$
363


$
333

Tax benefit for performance share compensation
$
135


$
128

Unrecognized compensation cost for performance shares, net of estimated forfeitures
$
2,442


$
2,399

Weighted average period over which unrecognized compensation will be recognized (years)
2.0




 
 
 
 
 
 

Six months ended June 30, 2016



Weighted-

Aggregate

Performance

Average

Grant Date

Shares

Grant Date

Fair Value

(000)

Fair Value

(000)
Outstanding and non-vested at December 31, 2015
77


$
52



Granted
29


49



Additional shares awarded based on performance
7


40



Vested
(33
)

40



Outstanding and non-vested at June 30, 2016
80


$
55


$
4,373

 
 
 
 

Six months ended

June 30,
2016

June 30,
2015
Share-based compensation for performance shares
$
714


$
635

Tax benefit for performance share compensation
$
266


$
244

Unrecognized compensation cost for performance shares, net of estimated forfeitures
$
2,442


$
2,399

Weighted average period over which unrecognized compensation will be recognized (years)
2.0

 
 


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 387,395 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 six months ended June 30, 2016, participants under the plan purchased 5,592 shares at an average price of $38.50 per share. For the six months ended June 30, 2015, participants under the plan purchased 5,087 shares at an average price of $44.74 per share. The weighted-average fair value of each purchase right under the ESPP granted for the six months ended June 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. The weighted-average fair value of each purchase right under the ESPP granted for the six months ended June 30, 2015, which is equal to the discount from the market value of the common stock at the end of each six month purchase period, was $7.52 per share. Share-based compensation expense of $34 and $37 was recognized during the three and six months ended June 30, 2016 and 2015, 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 June 30, 2016



Weighted-

Aggregate

Non-vested

Average

Grant Date

Shares

Grant Date

Fair Value

(000)

Fair Value

(000)
Outstanding and non-vested at March 31, 2016
15


$
51



Granted
16


44



Vested
(15
)

51



Outstanding and non-vested at June 30, 2016
16


$
44


$
688



Three months ended

June 30,
2016

June 30,
2015
Share-based compensation for non-vested shares
$
211


$
156

Tax benefit for non-vested share compensation
$
65


$
60

Unrecognized compensation cost for non-vested shares, net of estimated forfeitures
$
592


$
541

Weighted average period over which unrecognized compensation will be recognized (years)
0.9




 
 
 
 
 
 

Six months ended June 30, 2016



Weighted-

Aggregate

Non-vested

Average

Grant Date

Shares

Grant Date

Fair Value

(000)

Fair Value

(000)
Outstanding and non-vested at December 31, 2015
15


$
51



Granted
16


44



Vested
(15
)

51



Outstanding and non-vested at June 30, 2016
16


$
44


$
688


 
 
 
 

Six months ended

June 30,
2016

June 30,
2015
Share-based compensation for non-vested shares
$
382


$
316

Tax benefit for non-vested share compensation
$
135


$
122

Unrecognized compensation cost for non-vested shares, net of estimated forfeitures
$
592


$
541

Weighted average period over which unrecognized compensation will be recognized (years)
0.9