EMPLOYEE STOCK COMPENSATION

Share-based Compensation Expense

For the three months ended June 30, 2016 and 2015, share-based compensation expense on stock options and restricted stock awards and units was $1.9 million and $2.6 million, respectively, and the related tax benefits were $789 thousand and $1.1 million, respectively. For the six months ended June 30, 2016 and 2015, share-based compensation expense on stock options and restricted stock awards and units was $5.7 million and $4.3 million, respectively, and the related tax benefits were $2.4 million and $1.8 million, respectively. Share-based compensation expense on stock appreciation rights was $2 thousand and $30 thousand, respectively, and the related tax benefits were $1 thousand and $12 thousand, respectively, for the three months ended June 30, 2016 and 2015. For the six months ended June 30, 2016 and 2015, share-based compensation expense on stock appreciation rights was $15 thousand and $72 thousand, respectively, and the related tax benefits were $6 thousand and $30 thousand, respectively.

The Company issues stock-based compensation awards to its directors and employees from the 2013 Omnibus Plan. The 2013 Omnibus Plan provides that the aggregate number of shares of the Company's common stock that may be subject to awards 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 June 30, 2016, based on the number of shares then registered for issuance under the 2013 Omnibus Plan, 1,393,954 shares were available for future awards.

Unrecognized Share-based Compensation Expense

The following table presents unrecognized share-based compensation expense as of June 30, 2016:



	June 30, 2016
	Unrecognized Expense		Average Expected Recognition Period
	($ in thousands)
Stock option awards	$	1,832	3.9 years
Restricted stock awards and restricted stock units	16,362		2.5 years
Stock appreciation rights	6		0.9 years
Total	$	18,200	2.7 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 June 30, 2016:



	Three Months Ended June 30, 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	1,010,879		$	13.05	7.1 years	$	1,973
Granted	240,000		$	17.50	9.8 years
Cash settled	(55,826	)	$	14.33	2.3 years
Forfeited	(83,743	)	$	14.33	2.3 years
Expired	(2,053	)	$	13.88	0.0 years
Outstanding at end of period	1,109,257		$	13.84	8.3 years	$	4,714
Exercisable at end of period	466,979		$	12.57	6.6 years	$	2,582

The following table represents stock option activity as of and for the six months ended June 30, 2016:



	Six Months Ended June 30,
	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	320,000		$	16.78	9.7 years
Cash settled	(55,826	)	$	14.33	2.3 years
Forfeited	(113,743	)	$	13.55	3.4 years
Expired	(2,053	)	$	13.88	0.0 years
Outstanding at end of period	1,109,257		$	13.84	8.3 years	$	4,714
Exercisable at end of period	466,979		$	12.57	6.6 years	$	2,582

The following table represents changes in unvested stock options as of and for the three and six months ended June 30, 2016:



	Three Months Ended				Six Months Ended
	June 30, 2016				June 30, 2016
	Number of Shares		Weighted- Average Exercise Price per Share		Number of Shares		Weighted- Average Exercise Price per Share
Outstanding at beginning of period	600,016		$	13.29	566,266		$	12.99
Granted	240,000		$	17.50	320,000		$	16.78
Vested	(113,995	)	$	13.00	(130,245	)	$	12.95
Forfeited	(83,743	)	$	14.33	(113,743	)	$	13.55
Outstanding at end of period	642,278		$	14.78	642,278		$	14.78

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 plus, in some cases, the satisfaction of performance conditions. 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 and six months ended June 30, 2016:



	Three Months Ended				Six Months Ended
	June 30, 2016				June 30, 2016
	Number of Shares		Weighted Average Grant Date Fair Value Per Share		Number of Shares		Weighted Average Grant Date Fair Value Per Share
Outstanding at beginning of period	1,940,788		$	12.94	1,516,361		$	12.40
Granted ⁽¹⁾	761,976		$	18.77	1,491,563		$	18.01
Vested	(445,090	)	$	12.65	(588,898	)	$	13.07
Forfeited ⁽¹⁾	(743,043	)	$	13.05	(904,395	)	$	13.26
Outstanding at end of period	1,514,631		$	15.47	1,514,631		$	15.47

(1)

The number of granted shares includes aggregate performance-based shares of 50,000 and 602,671 for the three and six months ended June 30, 2016. The number of forfeited shares includes aggregate performance-based shares of 615,223 for each of the three and six months ended June 30, 2016. The grant date fair value of the performance-based shares are not considered for the weighted average grant date fair value 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. with one-third of the Initial SAR being vested on the grant date and the remaining amount vesting over a period of 2 years. The Initial SAR entitles the chief executive officer to dividend equivalent rights and originally contained an anti-dilution provision pursuant to which additional SARs (Additional SARs) were issued to the chief executive officer upon certain stock issuances by the Company, as described below. 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 this anti-dilution provision of the Initial SAR.

As described more fully in the SAR agreement, the original anti-dilution provision of the Initial SAR did not apply to certain issuances of the Company’s common stock for compensatory purposes, but did apply to certain other issuances of the Company’s common stock, including the issuances of common stock to raise capital. Pursuant to this anti-dilution provision, the Company issued Additional SARs to its chief executive officer with a base price determined as of each date of issuance, but otherwise with the same terms and conditions as the Initial SAR, except for an Additional SAR granted relating to a public offering of the Company’s tangible equity units (TEU) on May 21, 2014 that has different terms (Additional TEU SAR).

Regarding the Additional TEU SAR, the TEU contains a prepaid stock purchase contract (Purchase Contract) that can be 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 15. The Additional TEU SAR was calculated using the initial maximum settlement rate and, therefore, the number of shares underlying the Additional TEU SAR are 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. Until the Additional TEU SAR vests in full on May 15, 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 June 30, 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	1,559,459		$	11.60	6.6 years	$	9,198
Granted	—		$	—	0.0 years
Exercised	—		$	—	0.0 years
Forfeited	(219	)	$	10.09	6.4 years
Outstanding at end of period	1,559,240		$	11.60	6.4 years	$	10,132
Exercisable at end of period	1,549,874		$	11.61	6.4 years	$	10,057

The following table represents SARs activity as of and for the six months ended June 30, 2016:



	Six Months Ended June 30,
	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	(2,441	)	$	10.09	6.4 years
Outstanding at end of period	1,559,240		$	11.60	6.4 years	$	10,132
Exercisable at end of period	1,549,874		$	11.61	6.4 years	$	10,057

The following table represents changes in unvested SARs as of and for the three and six months ended June 30, 2016:



	Three Months Ended				Six Months Ended
	June 30, 2016				June 30, 2016
	Number of Shares		Weighted- Average Exercise Price per Share		Number of Shares		Weighted- Average Exercise Price per Share
Outstanding at beginning of period	10,839		$	10.09	25,963		$	10.09
Granted	—		$	—	—		$	—
Vested	(1,254	)	$	10.09	(14,156	)	$	10.09
Forfeited	(219	)	$	10.09	(2,441	)	$	10.09
Outstanding at end of period	9,366		$	10.09	9,366		$	10.09