EMPLOYEE STOCK COMPENSATION

Share-based Compensation Expense

For the three months ended March 31, 2016 and 2015, share-based compensation expense was $3.8 million and $1.7 million, respectively, and the related tax benefits were $1.6 million and $694 thousand, respectively. Share-based compensation expense on stock appreciation rights was $13 thousand and $42 thousand, respectively, and the related tax benefits were $5 thousand and $18 thousand, respectively, for the three months ended March 31, 2016 and 2015.

On July 16, 2013, the Company’s stockholders approved the Company’s 2013 Omnibus Stock Incentive Plan (the 2013 Omnibus Plan). Upon the approval of the 2013 Omnibus Plan, the Company ceased being able to grant new awards under the Company’s 2011 Omnibus Incentive Plan or any prior equity incentive plans. The 2013 Omnibus Plan provides that the aggregate number of shares of Company common stock that may be subject to awards under the 2013 Omnibus Plan will be 20 percent of the then outstanding shares of Company common stock (the Share Limit), provided that in no event will the Share Limit be less than the greater of 2,384,711 shares of Company common stock and the aggregate number of shares of Company common stock with respect to which awards have been properly granted under the 2013 Omnibus Plan up to that point in time. As of March 31, 2016, based on the number of shares then registered for issuance under the 2013 Omnibus Plan, 1,523,318 shares were available for future awards under the 2013 Omnibus Plan.

Unrecognized Share-based Compensation Expense

The following table presents unrecognized share-based compensation expense as of March 31, 2016:



	March 31, 2016
	Unrecognized Expense		Average Expected Recognition Period
	($ in thousands)
Stock option awards	$	1,436	3.3 years
Restricted stock awards and restricted stock units	13,833		3.7 years
Stock appreciation rights	9		1.1 years
Total	$	15,278	3.7 years

Stock Options

The Company has issued stock options to certain employees, officers and directors. Stock options are issued at the closing market price immediately before the grant date, and generally have a three to five year vesting period and contractual terms of seven to ten years.

The following table represents stock option activity as of and for the three months ended March 31, 2016:



	Three Months Ended March 31, 2016
	Number of Shares		Weighted- Average Exercise Price per Share		Weighted- Average Remaining Contract Term	Aggregated Intrinsic Value (In thousands)
Outstanding at beginning of period	960,879		$	12.86	6.9 years	$	796
Granted	80,000		$	14.62	9.8 years
Exercised	—		$	—	0.0 years
Forfeited	(30,000	)	$	11.36	6.7 years
Outstanding at end of period	1,010,879		$	13.05	7.1 years	$	1,973
Exercisable at end of period	410,863		$	12.70	5.9 years	$	1,973

The following table represents changes in unvested stock options as of and for the three months ended March 31, 2016:



	Three Months Ended
	March 31, 2016
	Number of Shares		Weighted- Average Exercise Price per Share
Outstanding at beginning of period	566,266		$	12.99
Granted	80,000		$	14.62
Vested	(16,250	)	$	12.61
Forfeited	(30,000	)	$	11.36
Outstanding at end of period	600,016		$	13.29

Restricted Stock Awards and Restricted Stock Units

The Company also has granted restricted stock awards and restricted stock units to certain employees, officers and directors. The restricted stock awards and units are valued at the closing price of the Company’s stock on the date of award. The restricted stock awards and units fully vest after a specified period (generally ranging from one to five years) of continued service from the date of grant. The Company recognizes an income tax deduction in an amount equal to the taxable income reported by the holders of the restricted stock, generally when vested or, in the case of restricted stock units, when settled.

The following table represents unvested restricted stock awards and restricted stock units activity as of and for the three months ended March 31, 2016:



	Three Months Ended
	March 31, 2016
	Number of Shares		Weighted- Average Price per Share
Outstanding at beginning of period	1,516,361		$	12.40
Granted ⁽¹⁾	729,587		$	14.62
Vested	(143,808	)	$	15.17
Forfeited	(161,352	)	$	13.42
Outstanding at end of period	1,940,788		$	12.94

(1)

Aggregate performance-based shares of 672,757 are included in the number of granted shares, but not considered in the weighted average exercise price per share. These awards are linked to certain performance conditions relating to profitability and regulatory standing and actual amounts of stock released upon vesting will be determined by the Compensation, Nominating, and Corporate Governance Committee upon the Committee's certification of the satisfaction of the target level of performance.

Stock Appreciation Rights

On August 21, 2012, the Company granted to its chief executive officer a ten-year stock appreciation right (SAR) with respect to 500,000 shares (Initial SAR) of the Company’s common stock with a base price of $12.12 per share. One-third of the Initial SAR vested on the grant date, one-third vested on the first anniversary of the grant date and one-third vested on the second anniversary of the grant date such that the SAR was fully vested on August 21, 2014, the second anniversary of the grant date. Upon cessation of the chief executive officer’s service with the Company for “Cause” or without “Good Reason” (including a cessation of service following the expiration of the term of the chief executive officer’s employment agreement), the vested portion of all SARs will expire 90 days following the cessation of service.

The SARs originally were to be settled in cash and the compensation expense for the SARs was recognized over the vesting period based on the fair value as calculated using Black Scholes as of the grant date and adjusted each quarter. On December 13, 2013 (the Conversion Date), the Company amended the Initial SAR agreement to provide that the SARs be settled in shares of voting common stock rather than cash, with all other terms remaining substantially the same. Compensation expense has been recognized over the expected term of the SARs based on the fair value as calculated using Black Scholes as of the Conversion Date for the SARs issued before the Conversion Date and as of the grant dates for the SARs issued after the Conversion Date.

The SAR agreement, as amended, provides that the SARs (whether vested or unvested) confer dividend equivalent rights. The SAR agreement originally contained an anti-dilution provision pursuant to which additional SARs (Additional SARs) had been issued to the Company’s chief executive officer with a base price determined as of the date of issuance, but otherwise with the same terms and conditions (including vesting and dividend equivalent rights) as the Initial SAR. These Additional SARs had been issued upon the Company’s subsequent issuances of shares of common stock; however, the anti-dilution adjustment did not apply to certain issuances of common stock for compensatory purposes as described more fully under the terms of the SAR agreement. On March 2, 2016, the chief executive officer entered into a letter agreement pursuant to which he voluntarily waived the right to Additional SARs that would otherwise have been issued with respect to the Company’s common stock offering completed on March 8, 2016. On March 24, 2016, concurrent with entering into a new employment agreement with the Company, the chief executive officer entered into a letter agreement that eliminated the anti-dilution provision of the Initial SAR.

The Initial SAR and Additional SARs have the same vesting and dividend equivalent terms, except for an additional SAR for 300,219 shares granted on May 21, 2014 (Additional TEU SAR) to the Company’s chief executive officer relating to a public offering of the Company’s tangible equity units (TEUs). Each TEU is comprised of a prepaid stock purchase contract (each, a Purchase Contract) and a junior subordinated amortizing note due May 15, 2017 issued by the Company (each, an Amortizing Note).The Purchase Contracts are settled in shares of the Company’s voting common stock based on a maximum settlement rate (subject to adjustment) and a minimum settlement rate (subject to adjustment) as more fully described under Note 16. The number of settlement shares underlying the Additional TEU SAR was calculated using the initial maximum settlement rate and, therefore, the number of shares underlying the Additional TEU SAR is subject to adjustment and forfeiture if the aggregate number of shares of stock issued in settlement of any single Purchase Contract is less than the initial maximum settlement rate. The Additional TEU SAR vests in full on May 21, 2017, which is the date each Purchase Contract is required to be settled in shares of voting common stock, unless settled earlier at the holder’s option. Until the Additional TEU SAR vests in full on May 21, 2017 or accelerates in vesting due to early settlement of a Purchase Contract at the holders' option, the Additional TEU SAR has no dividend equivalent rights and the shares underlying the Additional TEU SAR are subject to forfeiture.

The following table represents SARs activity as of and for the three months ended March 31, 2016:



	Three Months Ended March 31, 2016
	Number of Shares		Weighted- Average Exercise Price per Share		Weighted- Average Remaining Contract Term	Aggregated Intrinsic Value (In thousands)
Outstanding at beginning of period	1,561,681		$	11.60	6.6 years	$	4,716
Granted	—		$	—	0.0 years	$	—
Exercised	—		$	—	0.0 years	$	—
Forfeited	(2,222	)	$	10.09	6.4 years	$	—
Outstanding at end of period	1,559,459		$	11.60	6.4 years	$	9,198
Exercisable at end of period	1,548,620		$	11.61	6.4 years	$	9,117

The following table represents changes in unvested SARs as of and for the three months ended March 31, 2016:



	Three Months Ended
	March 31, 2016
	Number of Shares		Weighted- Average Exercise Price per Share
Outstanding at beginning of period	25,963		$	10.09
Granted	—		$	—
Vested	(12,902	)	$	10.09
Forfeited	(2,222	)	$	10.09
Outstanding at end of period	10,839		$	10.09