NOTE 12-Stock-Based Compensation

 

FASB ASC Topic 718 requires that the fair value of equity awards granted to employees be recognized as compensation expense over the period during which an employee is required to provide service in exchange for such awards.    

 

The following table presents information about the Corporation’s stock plans, adjusted for stock dividends distributed, as of December 31, 2014. 

 

 

Stock Incentive Plans (2000 Plan and LTIP)

 

Options awarded under these plans to date have been granted with an exercise price equal to the fair value of the stock on the grant date, a minimum vesting period of six months and an expiration period of ten years.  Restricted stock awards under these plans have been granted at fair value and with 50% of the shares vesting in two years and 50% in three years.  Upon exercise and/or award, the Corporation has historically issued authorized, but unissued, common stock to satisfy the options/awards.

 

The following table presents compensation expense and related tax benefits for stock option and restricted stock awards recognized on the consolidated statement of income.

 

 

The tax benefit shown in the preceding table is less than the benefit that would be calculated using the Corporation’s 35% statutory Federal tax rate.  Under FASB ASC Topic 718, tax benefits are only recognized over the vesting period for options that ordinarily will generate a tax deduction when exercised (non-qualified stock options) and restricted stock awards.

 

The Corporation granted the following stock options and restricted stock awards during the years ended December 31, 2014, 2013 and 2012.

 

 

The weighted average grant-date fair value and weighted average assumptions used to determine the fair value using the Black-Scholes valuation model for the stock options granted are presented below. 

 

 

 

The expected life of the options was estimated based on historical behavior and represents the period of time that options granted are expected to be outstanding.  The risk-free interest rate is the U.S. Treasury rate commensurate with the expected life of the options on the grant date.  Volatility of the Corporation’s stock price was based on historical volatility for the period commensurate with the expected life of the options.  Dividend yield was based on dividends for the most current year divided by the average market price for the most current year.

 

A summary of stock options activity from the option and stock incentive plans, adjusted for stock dividends distributed, is shown below.

 

 

The following table presents information about stock options exercised for the years ended December 31, 2014, 2013 and 2012.

 

 

The following table presents information about non-vested options and restricted stock, adjusted for stock dividends distributed, for the year ended December 31, 2014.

 

 

As of December 31, 2014, total unrecognized compensation cost related to non-vested options and restricted stock was $456,000.  The cost is expected to be recognized over a weighted average period of 1.0 year.

 

Employee Stock Purchase Plan (ESPP)

 

Under the ESPP, eligible employees can purchase common stock of the Corporation at 85% of the fair market value of the stock at the beginning or end of the six-month offering period, whichever is lower.  The ESPP is considered to be a compensatory plan.  The following table presents information about the ESPP for the years ended December 31, 2014, 2013 and 2012.

 

 

In 2014, 940 shares were reissued from treasury stock and 6,770 shares were issued from authorized but unissued common stock to satisfy the purchase of ESPP shares.  In 2013, 4,174 shares were reissued from treasury stock and 4,246 shares were issued from authorized but unissued common stock to satisfy the purchase of ESPP shares.  In 2012, the Corporation issued authorized, but unissued, common stock to satisfy the purchase of all ESPP shares.   

 

Employee Stock Bonus Plan (ESBP)

 

The ESBP is administered by nonemployee members of the Corporation’s Board of Directors, under which the Corporation may issue shares of its common stock to employees as performance based compensation.  There were no shares of common stock issued under the ESBP in 2014, 2013 and 2012.