EMPLOYEE STOCK COMPENSATION

Share-based Compensation Expense

For the three months ended March 31, 2017 and 2016, share-based compensation expense on stock options and restricted stock awards and units was $2.9 million and $3.8 million, respectively, and the related tax benefits were $1.2 million and $1.6 million, respectively. Share-based compensation expense on stock appreciation rights was $42 thousand and $13 thousand, respectively, and the related tax benefits were $17 thousand and $5 thousand, respectively, for the three months ended March 31, 2017 and 2016.

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 March 31, 2017, based on the number of shares then registered for issuance under the 2013 Omnibus Plan, 1,490,137 shares were available for future awards.

The Company maintains the SECT to fund future employee stock compensation and benefit obligations of the Company. There has been no shares funded out of the SECT as of March 31, 2017. See Note 15 for additional information.

Unrecognized Share-based Compensation Expense

The following table presents unrecognized share-based compensation expense as of March 31, 2017:



	March 31, 2017
	Unrecognized Expense		Average Remaining Expected Recognition Period
	($ in thousands)
Stock option awards	$	1,281	3.5 years
Restricted stock awards and restricted stock units	6,925		2.9 years
Total	$	8,206	3.0 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 March 31, 2017:



	Three Months Ended March 31, 2017
	Number of Shares		Weighted- Average Exercise Price per Share		Weighted- Average Remaining Contract Term	Aggregated Intrinsic Value (In thousands)
Outstanding at beginning of period	968,591		$	13.95	6.4 years	$	3,336
Exercised	(91,000	)	$	12.06	4.8 years
Outstanding at end of period	877,591		$	14.14	6.5 years	$	5,755
Exercisable at end of period	364,253		$	12.84	6.5 years	$	2,862

The following table represents changes in unvested stock options as of and for the three months ended March 31, 2017:



	Three Months Ended
	March 31, 2017
	Number of Shares		Weighted- Average Exercise Price per Share
Outstanding at beginning of period	518,936		$	15.04
Vested	(5,598	)	$	13.19
Outstanding at end of period	513,338		$	15.07

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 months ended March 31, 2017:



	Three Months Ended
	March 31, 2017
	Number of Shares		Weighted Average Grant Date Fair Value Per Share
Outstanding at beginning of period	1,417,144		$	16.16
Vested	(302,842	)	$	18.95
Forfeited	(57,881	)	$	14.85
Outstanding at end of period	1,056,421		$	15.43

Stock Appreciation Rights

On August 21, 2012, the Company granted to Steven A. Sugarman, its then- (now former) 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 Mr. Sugarman to dividend equivalent rights and originally contained an anti-dilution provision pursuant to which additional SARs (Additional SARs) were issued to Mr. Sugarman 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, Mr. Sugarman entered into a letter agreement that eliminated this anti-dilution provision of the Initial SAR. Under the terms of the March 24, 2016 letter agreement, in consideration of the removal of the anti-dilution provision of the Initial SAR, the Company granted Mr. Sugarman a onetime performance based restricted stock award with an aggregate grant date fair market value of $5.0 million, which would vest in full on March 24, 2017, but was also subject to restrictions on sale or transfer through March 24, 2021. In connection with Mr. Sugarman’s resignation as the Company’s chief executive officer on January 23, 2017, all unvested equity awards (including any unvested SARs) immediately vested and became free of all restrictions. In addition, the SARs continued (and continue) to remain exercisable for their full terms, with dividend equivalent rights of the SARs also continuing in effect during their full terms.

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 the former 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 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. By its original terms, the Additional TEU SAR was to vest in full on May 15, 2017 or accelerate in vesting upon early settlement of a Purchase Contract at the holders' option, and until it vested, the Additional TEU SAR was to have no dividend equivalent rights and the shares underlying the Additional TEU SAR were subject to forfeiture.

The following table represents SARs activity as of and for the three months ended March 31, 2017:



	Three Months Ended March 31, 2017
	Number of Shares		Weighted- Average Exercise Price per Share		Weighted- Average Remaining Contract Term	Aggregated Intrinsic Value (In thousands)
Outstanding at beginning of period	1,559,047		$	11.60	5.6 years	$	8,961
Forfeited	(35	)	$	10.09	5.6 years
Outstanding at end of period	1,559,012		$	11.60	5.4 years	$	14,183
Exercisable at end of period	1,559,012		$	11.60	5.4 years	$	14,183

The following table represents changes in unvested SARs as of and for the three months ended March 31, 2017:



	Three Months Ended
	March 31, 2017
	Number of Shares		Weighted- Average Exercise Price per Share
Outstanding at beginning of period	8,069		$	10.09
Vested	(8,034	)	$	10.09
Forfeited	(35	)	$	10.09
Outstanding at end of period	—		$	10.09