20. Stock-Based Compensation

Pursuant to the Hilltop Holdings Inc. 2012 Equity Incentive Plan (the “2012 Plan”), the Company may grant nonqualified stock options, stock appreciation rights, restricted stock, RSUs, performance awards, dividend equivalent rights and other awards to employees of the Company, its subsidiaries and outside directors of the Company. Upon the approval by stockholders and effectiveness of the 2012 Plan in September 2012, no additional awards were permissible under the 2003 Equity Incentive Plan (the “2003 Plan”). In the aggregate, 4,000,000 shares of common stock may be delivered pursuant to awards granted under the 2012 Plan. At December 31, 2015, 2,570,555 shares of common stock remain available for issuance pursuant to the 2012 Plan, including shares that may be delivered pursuant to outstanding awards. Compensation expense related to the 2012 Plan and the 2003 Plan was $8.3 million, $4.7 million and $1.7 million during 2015, 2014 and 2013, respectively.

During 2015, 2014 and 2013, Hilltop granted 13,631, 9,519 and 9,343 shares of common stock, respectively, to certain non-employee members of the Company’s Board of Directors for services rendered to the Company pursuant to the 2012 Plan.

Restricted Stock Awards

The Compensation Committee of the Board of Directors of the Company has issued restricted shares of Hilltop common stock (“Restricted Stock Awards”) pursuant to the 2012 Plan. The Restricted Stock Awards generally cliff vest on the third anniversary of the grant date and are subject to service conditions set forth in the award agreements, with associated costs recognized on a straight-line basis over the respective vesting periods. The award agreements governing the Restricted Stock Awards provide for accelerated vesting under certain conditions.

Prior to the completion of the SWS Merger and in accordance with the SWS merger agreement, on August 20, 2014, SWS granted restricted shares of SWS common stock to certain of its executive officers and key employees. On January 1, 2015, the effective time of the SWS Merger, these restricted shares of SWS common stock converted into the right to receive an aggregate of 62,994 Restricted Stock Awards based on the value of the merger consideration, and their vesting schedule did not accelerate. Such Restricted Stock Awards generally have begun to vest in three equal annual installments commencing on August 20, 2015, and are subject to service conditions set forth in the award agreements, with associated costs recognized on a straight-line basis over the respective vesting periods.

At December 31, 2015, unrecognized compensation expense related to outstanding Restricted Stock Awards of $0.7 million is expected to be recognized over a weighted average period of 0.30 years.

Restricted Stock Units

The Compensation Committee of the Board of Directors of the Company has issued RSUs pursuant to the 2012 Plan. Certain RSUs are subject to time-based vesting conditions and generally provided for a cliff vest on the third anniversary of the grant date, while other RSUs provided for vesting based upon the achievement of certain performance goals over a three-year period service conditions set forth in the award agreements, with associated costs generally recognized on a straight-line basis over the respective vesting periods. The RSUs are not transferable, and the shares of common stock issuable upon conversion of vested RSUs are generally subject to transfer restrictions for a period of one year following conversion, subject to certain exceptions. In addition, the applicable RSU award agreements provide for accelerated vesting under certain conditions.

At December 31, 2015, 709,399 of the outstanding RSUs are subject to time-based vesting conditions and generally cliff vest on the third anniversary of the grant date, and 165,875 outstanding RSUs vest based upon the achievement of certain performance goals over a three-year period. At December 31, 2015, unrecognized compensation expense related to outstanding RSUs of $11.3 million is expected to be recognized over a weighted average period of 1.85 years.

The following table summarizes information about nonvested Restricted Stock Award and RSU activity for the noted periods (shares in thousands).


		Restricted Stock Awards			RSUs
			Weighted			Weighted
			Average			Average
			Grant Date			Grant Date
		Outstanding	Fair Value		Outstanding	Fair Value
Balance, January 1, 2013		-	$	-	-	$	-
	Granted	471	$	13.32	-	$	-
Balance, December 31, 2013		471	$	13.32	-	$	-
	Granted	-	$	-	444	$	23.16
	Vested/Released	(2)	$	13.25	(1)	$	24.06
	Forfeited	(3)	$	13.25	(8)	$	23.74
Balance, December 31, 2014		466	$	13.32	435	$	23.14
	Granted	63	$	19.95	491	$	19.61
	Vested/Released	(54)	$	19.58	(12)	$	22.45
	Forfeited	(22)	$	13.25	(39)	$	21.93
Balance, December 31, 2015		453	$	13.50	875	$	21.22

Vested/Released Restricted Stock Awards and RSUs include an aggregate of 4,784 shares withheld to satisfy employee statutory tax obligations during 2015 and 2014. Pursuant to certain RSU award agreements, an aggregate of 7,025 vested RSUs at December 31, 2015 require deferral of the settlement in shares and statutory tax obligations to a future date.

Stock Options

Stock options granted on November 2, 2011 to two senior executives pursuant to the 2003 Plan to purchase an aggregate of 600,000 shares of the Company’s common stock (the “Stock Option Awards”) at an exercise price of $7.70 per share were fully vested and exercisable at December 31, 2015. These Stock Option Awards expire on November 2, 2016. The fair value for these Stock Option Awards granted was estimated using the Black-Scholes option pricing model with an expected volatility of 25%, a risk-free interest rate of 0.96%, a dividend yield rate of zero, a five-year expected life of the options and a forfeiture rate of 15%.