NOTE 13 – STOCK BASED COMPENSATION

Stock based compensation expense that has been charged against income was $913,000 and $1,966,000 for the three and nine months ended September 30, 2018, respectively, and $459,000 and $1,484,000 for the three and nine months ended September 30, 2017, respectively.

2014 Omnibus Incentive Plan

The Company’s 2014 Omnibus Incentive Plan (“Omnibus Incentive Plan”) provides for the grant of nonqualified and incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units, and other awards that may be settled in, or based upon the value of, the Company’s common stock. The aggregate number of shares of common stock available for issuance under the Omnibus Incentive Plan is 1,200,000 shares.

Restricted Stock Awards

A summary of changes in the Company’s nonvested Restricted Stock Awards (“RSAs”) under the Omnibus Incentive Plan for the nine months ended September 30, 2018 were as follows:

				Weighted-Average
				Grant-Date
Nonvested RSAs	Shares			Fair Value
Nonvested at January 1, 2018		102,776		$	18.68
Granted		65,001			40.64
Vested		(63,995	)		20.38
Forfeited		(2,422	)		27.56
Nonvested at September 30, 2018		101,360		$	31.48

RSAs granted to employees under the Omnibus Incentive Plan typically vest over three to four years. Compensation expense for the RSAs will be recognized over the vesting period of the awards based on the fair value of the stock at the issue date. As of September 30, 2018, there was $2,166,000 of unrecognized compensation cost related to the nonvested RSAs. The cost is expected to be recognized over a remaining period of 3.17 years.

Restricted Stock Units

A summary of changes in the Company’s nonvested Restricted Stock Units (“RSUs”) under the Omnibus Incentive Plan for the nine months ended September 30, 2018 were as follows:

			Weighted-Average
			Grant-Date
Nonvested RSUs	Shares		Fair Value
Nonvested at January 1, 2018		—	$	—
Granted		59,658		38.75
Vested		—		—
Forfeited		—		—
Nonvested at September 30, 2018		59,658	$	38.75

RSUs granted to employees under the Omnibus Incentive Plan vest after five years. Compensation expense for the RSUs will be recognized over the vesting period of the awards based on the fair value of the stock at the issue date. As of September 30, 2018, there was $2,118,000 of unrecognized compensation cost related to the nonvested RSUs. The cost is expected to be recognized over a remaining period of 4.59 years.

Performance Stock Units

A summary of changes in the Company’s nonvested Performance Stock Units (“PSUs”) under the Omnibus Incentive Plan for the nine months ended September 30, 2018 were as follows:

			Weighted-Average
			Grant-Date
Nonvested PSUs	Shares		Fair Value
Nonvested at January 1, 2018		—	$	—
Granted		59,658		38.57
Vested		—		—
Forfeited		—		—
Nonvested at September 30, 2018		59,658	$	38.57

PSUs granted to employees under the Omnibus Incentive Plan vest after five years. The number of shares issued upon vesting will range from 0% to 175% of the PSUs granted based on the Company’s relative total shareholder return (“TSR”) as compared to the TSR of a specified group of peer banks. Compensation expense for the PSUs will be recognized over the vesting period of the awards based on the fair value of the award at the grant date. The fair value of PSUs granted is estimated using a Monte Carlo simulation. Expected volatilities were determined based on the historical volatilities of the Company and the specified peer group. The risk-free interest rate for the performance period was derived from the Treasury constant maturities yield curve on the valuation date.

	Nine Months Ended
	September 30, 2018
Grant date	May 1, 2018
Performance period	5.00 Years
Stock price	$	38.85
Triumph stock price volatility		29.13	%
Risk-free rate		2.76	%

As of September 30, 2018, there was $2,108,000 of unrecognized compensation cost related to the nonvested PSUs. The cost is expected to be recognized over a remaining period of 4.59 years.

Stock Options

A summary of the changes in the Company’s stock options under the Omnibus Incentive Plan for the nine months ended September 30, 2018 were as follows:

						Weighted-Average
						Remaining		Aggregate
				Weighted-Average		Contractual Term		Intrinsic Value
Stock Options	Shares			Exercise Price		(In Years)		(In Thousands)
Outstanding at January 1, 2018		185,328		$	18.97
Granted		51,952			38.75
Exercised		(2,556	)		17.16
Forfeited or expired		(3,186	)		18.98
Outstanding at September 30, 2018		231,538		$	23.43		8.22	$	3,448

Fully vested shares and shares expected to vest at September 30, 2018		231,538		$	23.43		8.22	$	3,448

Shares exercisable at September 30, 2018		75,550		$	17.73		7.69	$	1,547

Information related to the stock options for the nine months ended September 30, 2018 and 2017 was as follows:

	Nine Months Ended September 30,
(Dollars in thousands, except per share amounts)	2018		2017
Aggregate intrinsic value of options exercised	$	59	$	243
Cash received from option exercises		—		281
Tax benefit realized from options exercises		12		85
Weighted average fair value of options granted	$	13.22	$	8.71

Stock options awarded to employees under the Omnibus Incentive Plan are generally granted with an exercise price equal to the market price of the Company’s common stock at the date of grant, vest over four years, and have ten year contractual terms. The fair value of stock options granted is estimated at the date of grant using the Black-Scholes option-pricing model. Expected volatilities were determined based on a blend of the Company’s historical volatility and historical volatilities of a peer group of companies with a similar size, industry, stage of life cycle, and capital structure. The expected term of the options granted was determined based on the SEC simplified method, which calculates the expected term as the mid-point between the weighted average time to vesting and the contractual term. The risk-free interest rate for the expected term of the options was derived from the Treasury constant maturity yield curve on the valuation date.

The fair value of the stock options granted was determined using the following weighted-average assumptions:

	Nine Months Ended September 30,
	2018			2017
Risk-free interest rate		2.85	%		2.11	%
Expected term	6.25 years			6.25 Years
Expected stock price volatility		28.07	%		29.70	%
Dividend yield		—			—

As of September 30, 2018, there was $804,000 of unrecognized compensation cost related to nonvested stock options granted under the Omnibus Incentive Plan. The cost is expected to be recognized over a remaining period of 3.11 years.