COMPENSATION PLANS

The Company has adopted share-based compensation plans to reward and provide long-term incentive for directors and key employees of the Company. These plans provide for the granting of stock, stock options, stock-settled stock appreciation rights ("SSARs"), and restricted stock units (“RSUs”), as designated by the Company's Board of Directors upon the recommendation of the Compensation Committee. The Company uses authorized and unissued shares to satisfy share award exercises. There were no options or SSARs granted in 2013. At December 31, 2013, there were 978,660 shares available for grant under the various share-based compensation plans.

Total share-based compensation expense that was charged against income was $5.0 million, $2.5 million, and $1.8 million for the years ended December 31, 2013, 2012, and 2011 respectively. The total income tax benefit/(expense) recognized in additional paid in capital for share-based compensation arrangements was $0.2 million, $0.1 million, and $(0.1) million for the years ended December 31, 2013, 2012, and 2011, respectively.

Employee Stock Options and Stock-settled Stock Appreciation Rights

In determining compensation cost for stock options and SSARs, the Black-Scholes option-pricing model is used to estimate the fair value on date of grant. The Black-Scholes model is a closed-end model that uses the assumptions in the following table. There were no grants of employee stock options or SSARs during the years ended December 31, 2013, 2012, or 2011.

Stock options have been granted to key employees with exercise prices equal to the market price of the Company's common stock at the date of grant and 10-year contractual terms. Stock options have a vesting schedule of three to five years. The SSARs are subject to continued employment, have a 10-year contractual term and vest ratably over five years. Neither stock options nor SSARs carry voting or dividend rights until exercised. At December 31, 2013, there was $152,671 of total unrecognized compensation cost related to SSARs which is expected to be recognized over a weighted average period of 1.59 years. Various information related to the stock options and SSARs is shown below.



(in thousands)	2013		2012		2011
Compensation expense	$	213	$	478	$	911
Intrinsic value of option exercises on date of exercise	$	300	$	327	$	132
Cash received from the exercise of stock options	$	2,040	$	1,291	$	889

Following is a summary of the employee stock option and SSAR activity for 2013.



(Dollars in thousands, except share data)	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2013	651,841		$	17.30
Granted	—		—
Exercised	(163,748	)	13.15
Forfeited	(24,124	)	17.89
Outstanding at December 31, 2013	463,969		$	18.73	4.6 years	$	782
Exercisable at December 31, 2013	426,469		$	19.47	4.5 years	$	405

Restricted Stock Units (“RSU”)

As part of a long-term incentive plan, the Company awards nonvested stock, in the form of RSUs to employees. RSUs are subject to continued employment and vest ratably over three to five years. RSUs do not carry voting or dividend rights until vested. Sales of the units are restricted prior to vesting. Various information related to the RSUs is shown below.



(in thousands)	2013		2012		2011
Compensation expense	$	1,142	$	658	$	555
Total fair value at vesting date	828		660		331
Total unrecognized compensation cost for nonvested stock units	2,168		1,256		273
Expected years to recognize unearned compensation	3.6 years		4.0 years		0.9 years

A summary of the status of the Company's RSU awards as of December 31, 2013 and changes during the year then ended is presented below.



	Shares		Weighted Average Grant Date Fair Value
Outstanding at January 1, 2013	133,614		$	11.91
Granted	171,015		14.72
Vested	(62,422	)	13.27
Forfeited	(26,281	)	12.77
Outstanding at December 31, 2013	215,926		$	13.64

Stock Plan for Non-Management Directors

In 2006, the Company adopted a Stock Plan for Non-Management Directors, which provides for issuing 100,000 shares of common stock to non-employee directors as compensation in lieu of cash. In 2012, an amendment to the plan was approved by the shareholders allowing a total of up to 200,000 shares to be awarded. At December 31, 2013, there were 83,764 shares of stock available for issuance under the Stock Plan for Non-Management Directors. Shares are issued twice a year and compensation expense is recorded as the shares are earned, therefore, there is no unrecognized compensation cost related to this plan. In 2013, the Company issued 16,990 shares of stock at a weighted average fair value of $15.40 per share. In 2012, the Company issued 18,410 shares of stock at a weighted average fair value of $14.00 per share. In 2011, the Company issued 19,830 shares of stock at a weighted average fair value of $12.90 per share. The Company recognized $0.3 million of stock-based compensation expense for the shares issued to the directors in 2013, 2012, and 2011, respectively.

Employee Stock Issuance

Restricted stock was issued to certain key employees as part of their compensation. The restricted stock may be in the form of a one-time award or paid in pro rata installments. The stock is restricted for at least 2 years and upon issuance may be fully vested or vest over 5 years. The Company recognized $0.6 million, $0.2 million, and $30,000 of stock-based compensation expense for the shares issued to the employees in 2013, 2012, and 2011, respectively. The Company issued 37,943, 71,899, and 6,724 shares in 2013, 2012, and 2011, respectively.

In 2011, 2012 and 2013, the Company entered into long-term incentive agreements with certain key employees. These open awards are conditioned on certain performance criteria and market criteria measured against a group of peer banks over a 3 year period for each grant. The amount of the awards are determined at the end of the 3 year vesting period. In February 2014, the Company issued 146,700 shares to employees upon completion of the 2011-2013 performance cycle. The 2012 and 2013 grants are not yet determinable. The Company recorded $3.2 million, $1.3 million and $0 of stock-based compensation expense for these awards during 2013, 2012 and 2011, respectively.

401(k) plans

The Company has a 401(k) savings plan which covers substantially all full-time employees over the age of 21. The amount charged to expense for the Company's contributions to the plan was $1.2 million, $1.2 million and $1.1 million for 2013, 2012, and 2011, respectively.