Share-Based Compensation

The Company established the 2011 Plan which permits the grant of stock options, restricted stock, RSUs, performance-shares and other stock-based awards to the Company’s officers, directors, employees, and other persons expected to provide significant services to the Company and its subsidiaries through May 10, 2021. A total of 6,550,000 shares were authorized to be granted under the 2011 Plan at December 31, 2012, some of which were previously granted under incentive plans that were in effect prior to the 2011 Plan. In May 2013, the 2011 Plan was amended to increase the authorized shares by 2,265,000 shares, resulting in a total of 8,815,000 shares of common stock available for issuance under the 2011 plan as amended.

The 2011 Plan is administered by the Compensation Committee, which is comprised of two or more independent members of the Board of Directors. Under the 2011 Plan, no participant may receive options, restricted stock, or other awards that exceed 2,000,000 shares in any calendar year. Each contractual term of an option granted is fixed by the Compensation Committee, but, except in limited circumstances, the term cannot exceed ten years from the grant date. Restricted stock, RSU and performance-share awards have a vesting period as defined by the award agreement.

As of December 31, 2014, there were 3,490,545 shares underlying the 2011 Plan that are authorized, but not yet granted. The Company issues new shares of stock upon the exercise of stock options and the vesting of restricted stock, RSUs and performance shares. Stock options, restricted stock, and RSUs generally vest over a three to four year period and are based on service. Performance shares vest over a two year performance period based on service and a market-based performance condition.

Stock Options

The following table summarizes the activity for stock options granted by the Company:



	Shares		Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in $000s)
Outstanding at January 1, 2012	1,283,116		$	16.34	8.51	$	6,042
Granted	800,820		20.56
Exercised	(87,598	)	14.13			1,410
Forfeited or expired	(40,539	)	28.33
Outstanding at December 31, 2012	1,955,799		17.92		7.02	49,458
Granted	1,050,904		33.79
Exercised	(166,711	)	17.39			3,561
Forfeited or expired	(113,439	)	31.33
Outstanding at December 31, 2013	2,726,553		23.51		7.22	32,785
Granted	67,507		29.11
Exercised	(303,449	)	18.12			3,468
Forfeited	(126,883	)	31.24
Outstanding at December 31, 2014	2,363,728		23.95		6.34	1,223
Exercisable at December 31, 2014	1,236,543		17.40		5.22	1,223
Options expected to vest as of December 31, 2014	1,110,672		31.09		7.56	—

The grant-date fair values of stock options granted to employees and directors of the Company during the years ended December 31, 2014, 2013 and 2012 were $0.7 million, $15.8 million and $7.1 million, respectively. The weighted-average grant-date fair values of stock options granted during the years ended December 31, 2014, 2013 and 2012 were $10.05, $15.05 and $8.87, respectively. The total amount of cash received by the Company from the exercise of stock options was $5.5 million, $2.9 million and $1.2 million for the years ended December 31, 2014, 2013 and 2012, respectively. The total fair values of options that vested during the years ended December 31, 2014, 2013 and 2012 were $5.7 million, $4.3 million and $2.3 million, respectively.

Method and Assumptions Used to Estimate Fair Values of Options

The fair value of each stock option award was estimated at the grant date using the Black-Scholes option-pricing model. The weighted-average assumptions the Company used to value these awards are shown below.



	For the Years Ended December 31,
	2014		2013		2012
Risk-free interest rate	1.17	%	0.75	%	0.73	%
Dividend yield	—	%	—	%	0.05	%
Expected life (years)	4.00		5.00		4.50
Volatility	42.56	%	51.45	%	52.66	%
Forfeiture rate	2.20	%	3.14	%	1.40	%

The risk-free interest rate is based on the U.S. Treasury yield in effect at the grant date with a term equal to the expected life of the option. The expected life of the options represents the period of time the options are expected to be outstanding. The dividend yield is based on the Company’s estimated annual dividend payout at the grant date. Volatility is based on the Company’s historical data, and in the case of the years ended December 31, 2013 and 2012, also includes that of a peer group of companies due to the lack of stock-price history. The forfeiture rate is based on historical termination experience.

Non-Vested Share Activity

The Company’s non-vested share-based awards consist of RSUs and performance shares. The grant-date fair values of share-based awards granted during the years ended December 31, 2014, 2013 and 2012 was $24.0 million, $1.3 million and $2.3 million, respectively.

The following table summarizes the activity for non-vested awards granted by the Company:



	Shares		Weighted-Average Grant-Date Fair Value Per Share		Weighted-Average Contractual Term (in years)	Aggregate Intrinsic Value (in $000s)
Outstanding at January 1, 2012	1,766,960		$	15.84	5.65	$	36,240
Granted	110,783		20.72
Vested and settled	(969,815	)				20,189
Forfeited	(92,000	)	24.93
Outstanding at December 31,2012	815,928		22.32		3.09	35,101
Granted	36,576		35.79
Vested and settled	(522,762	)				20,922
Forfeited	(21,316	)	25.73
Outstanding at December 31, 2013	308,426		25.65		1.90	10,906
Granted	738,164		32.46
Vested and settled	(30,898	)	29.45			910
Forfeited	(94,133	)	8.48
Outstanding at December 31, 2014	921,559		30.42		1.84	15,215
Non-vested shares expected to vest as of December 31, 2014	901,631		30.39		1.83	14,886

The total fair value of shares that vested and settled during the years ended December 31, 2014, 2013 and 2012, were $0.9 million, $11.1 million and $9.8 million, respectively.

Method and Assumptions Used to Estimate Fair Values of Non-Vested Shares

The fair value of the Company’s restricted stock and RSUs is generally based on the average of the high and low market prices of its common stock on the date of grant. The fair value of each performance-share award was estimated at the grant date using the Monte-Carlo simulation model. The weighted-average assumptions the Company used to value performance-share awards are shown below.



	For the Year Ended December 31, 2014
Risk-free interest rate	0.82		%
Simulation period (years)	2.76
Volatility	46.58		%
Beginning TSR price	$	28.09
Forfeiture rate	2.20		%

The risk-free interest rate is based on the U.S. Treasury yield in effect at the grant date with a term equal to the simulation period used in the Monte-Carlo simulation model. The simulation period is equal to the performance period associated with the performance shares. Volatility is based on the Company’s historical data. Beginning TSR price is equal to the average closing price for the last twenty trading days immediately prior to the first day of the performance period. The forfeiture rate is based on historical termination experience. The performance shares vest December 31, 2016, and the shares ultimately awarded will be based upon the performance percentage, which can range from 0% to 200% of the target performance award grant. The performance shares ultimately awarded upon vesting are based on the percentile rank of the Company’s TSR relative to the distribution of the TSRs of peer group companies.

Share-Based Compensation Expense

Share-based compensation expense recognized by the Company is net of actual forfeitures as well as estimated forfeitures, which are estimated based on historical termination behavior. Share-based compensation expense of $14.5 million, $13.0 million and $14.2 million for the years ended December 31, 2014, 2013 and 2012, respectively, is included in salaries and benefits expense on the consolidated statements of comprehensive income (loss). The tax benefit recognized related to share-based compensation expense for the years ended December 31, 2014, 2013 and 2012 was $5.5 million, $4.9 million and $5.4 million, respectively. For unvested stock options and shares, the Company had $5.3 million and $15.1 million, respectively, of total unrecognized compensation cost at December 31, 2014, which is expected to be recognized over a weighted-average period of 1.1 years and 1.6 years, respectively.

On October 1, 2013, the Company and Charles E. Cauthen, the Company’s previous Executive Vice President and Chief Financial Officer, entered into a separation agreement, pursuant to which the vesting dates of certain stock options awarded to Mr. Cauthen would be accelerated. The acceleration of vesting dates for these awards was considered a Type III modification for share-based compensation, and, as a result, the Company reversed all expense previously recorded for these awards and recorded the incremental compensation expense over the new requisite service period. The total incremental compensation expense resulting from this modification was $3.0 million. The net effect to share-based compensation expense associated with these awards was $1.2 million and $1.1 million for the years ended December 31, 2014 and 2013, respectively, after considering the reversal of share-based compensation expense previously recorded in accordance with these awards’ original terms.