NOTE 16 — STOCK COMPENSATION PLANS

The Company issues stock options and restricted stock awards to employees under share-based compensation plans. During the years ended December 31, 2014, 2013 and 2012, total compensation expense related to stock options and restricted stock awards reduced income before taxes by $13.9 million, $13.5 million and $12.7 million, respectively. The net tax benefit recognized in equity for stock compensation plans was $6.5 million, $5.5 million, and $462 thousand for the years ended December 31, 2014, 2013 and 2012, respectively.

As of December 31, 2014, there are 3,715,327 shares available to be issued, subject to the Company’s current 1998 Stock Incentive Plan, as amended.

Stock Options — The Company issues fixed stock options to certain employees, officers, and directors. Stock options are issued at the current market price on the date of grant with a three-year or four-year vesting period and contractual terms of 7 or 10 years. The Company issues new shares upon the exercise of stock options.

The following table presents the activity for the Company’s stock options as of and for the year ended December 31, 2014:



	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (In thousands)
Outstanding at beginning of year	406,731		$	26.72
Granted	—		—
Exercised	(234,101	)	21.09
Forfeited	(130,514	)	38.76
Outstanding at end of year	42,116		$	20.75	0.19 years	$	757
Vested or expected to vest at year-end	42,116		$	20.75	0.19 years	$	757
Exercisable at year-end	42,116		$	20.75	0.19 years	$	757

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: (1) the expected term (estimated period of time outstanding) of stock options granted is estimated using the historical exercise behavior of employees; (2) the expected volatility is based on historical volatility for a period equal to the stock option’s expected term; (3) the expected dividend yield is based on the Company’s prevailing dividend rate at the time of grant; and (4) the risk-free rate is based on the U.S. Treasury strips in effect at the time of grant equal to the stock option’s expected term. The Company did not issue any stock options during the years ended December 31, 2014, 2013, and 2012.

The Company received $4.9 million and $1.7 million as of December 31, 2014 and 2013, respectively, in cash proceeds from stock option exercises. The net tax benefit recognized from stock option exercises was $1.4 million for 2014 compared to $48 thousand for 2013.

The following table presents information about stock options outstanding as of December 31, 2014:



	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number of Outstanding Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Number of Exercisable Options	Weighted Average Exercise Price
$10.00 to $14.99	2,365	$	14.95	1.02 years	2,365	$	14.95
$20.00 to $24.99	39,751	$	21.09	0.14 years	39,751	$	21.09
$10.00 to $24.99	42,116	$	20.75	0.19 years	42,116	$	20.75

The following table presents information related to stock options for the years ended December 31, 2014, 2013 and 2012:



	Year Ended December 31,
	2014		2013		2012
Total intrinsic value of options exercised (in thousands)	$	3,546	$	926	$	978
Total fair value of options vested (in thousands)	$	—	$	363	$	3,717

As of December 31, 2013 all stock options are fully vested and all compensation cost related to stock options have been recognized.

Restricted Stock Awards — In addition to stock options, the Company also grants restricted stock awards to directors, officers and employees. The restricted stock awards fully vest after three to five years of continued employment from the date of grant; some of the awards are also subject to achievement of certain established financial goals. The Company becomes entitled to an income tax deduction in an amount equal to the taxable income reported by the holders of the restricted stock when the restrictions are released and the shares are issued. Restricted stock awards are forfeited if officers and employees terminate employment prior to the lapsing of restrictions or if established financial goals are not achieved. The Company records forfeitures of issued restricted stock as treasury share repurchases.

The following table presents a summary of the activity for the Company’s time-based and performance-based restricted stock awards as of December 31, 2014, including changes during the year then ended:



	2014
	Restricted Stock Awards
	Time-Based				Performance-Based
	Shares		Weighted Average Price		Shares		Weighted Average Price
Outstanding at beginning of year	438,508		$	17.79	956,707		$	23.74
Granted	43,210		33.19		603,697		36.85
Vested	(343,722	)	15.91		(340,866	)	23.52
Forfeited	(30,733	)	21.21		(57,228	)	29.71
Outstanding at end of year	107,263		$	29.01	1,162,310		$	30.32

During 2014 there were no restricted stock grants to outside directors.

Restricted stock awards are valued at the closing price of the Company’s stock on the date of award. The weighted average fair values of time-based restricted stock awards granted during the years ended December 31, 2014, 2013 and 2012 were $33.19, $28.55 and $21.66, respectively. The weighted average fair value of performance-based restricted stock awards granted during the year ended December 31, 2014, 2013 and 2012 were $36.85, $25.25 and $22.05, respectively. The total fair value of time-based restricted stock awards vested during 2014, 2013 and 2012 was $12.2 million, $29.4 million and $3.5 million, respectively. The total fair value of performance-based restricted stock award vested during 2014, 2013 and 2012 were $12.6 million, $4.4 million and $4.7 million, respectively.

As of December 31, 2014, total unrecognized compensation cost related to time-based and performance-based restricted stock awards amounted to $2.3 million and $21.7 million, respectively. This cost is expected to be recognized over a weighted average period of 2.55 years and 1.93 years, respectively.

Stock Purchase Plan — The Company adopted the 1998 Employee Stock Purchase Plan (the “Purchase Plan”) providing eligible employees of the Company and its subsidiaries participation in the ownership of the Company through the right to purchase shares of its common stock at a discount. The Purchase Plan allows employees to purchase shares at 90% of the per share market price at the date of exercise, with an annual common stock value purchase limitation of $25,000. As of December 31, 2014, the Purchase Plan qualifies as a non-compensatory plan under Section 423 of the Internal Revenue Code and, accordingly, no compensation expense is recognized under the Purchase Plan.

The Purchase Plan covers a total of 2,000,000 shares of the Company’s common stock. During 2014 and 2013, 58,587 shares totaling $1.9 million and 53,015 shares totaling $1.4 million, respectively, were sold to employees under the Purchase Plan. As of December 31, 2014, there were 694,713 shares available under the Purchase Plan.