Share-Based Compensation Plans

12 Months Ended

Dec. 31, 2015

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

NOTE 15. Share-Based Compensation Plans:

The First American Financial Corporation 2010 Incentive Compensation Plan (the “Incentive Compensation Plan”), effective May 28, 2010, permits the granting of stock options, stock appreciation rights, restricted stock, RSUs, performance units, performance shares and other stock-based awards. Eligible participants in the Incentive Compensation Plan include the Company’s directors and officers, as well as other employees. At December 31, 2015, 5.2 million shares of common stock remain available to be issued from either authorized and unissued shares or previously issued shares acquired by the Company, subject to certain annual limits based on the type of award granted. The Incentive Compensation Plan terminates 10 years from the effective date unless cancelled prior to that date by the Company’s board of directors.

The First American Financial Corporation 2010 Employee Stock Purchase Plan (the “ESPP”) allows eligible employees the option to purchase common stock of the Company at 85% of the lower of the closing price on either the first or last day of each quarterly offering period. There were 335,000 and 354,000 shares issued in connection with this plan for the years ended December 31, 2015 and 2014, respectively. At December 31, 2015, there were 3.1 million shares reserved for future issuances.

The following table presents compensation expense associated with the Company’s share-based compensation plans:

	2015		2014		2013
	(in thousands)
Expense:
Restricted stock units	$	21,761	$	17,197	$	20,827
Stock options		271		271		8
Employee stock purchase plan		2,307		1,834		1,466
	$	24,339	$	19,302	$	22,301

The following table summarizes RSU activity for the year ended December 31, 2015:

(in thousands, except weighted-average grant-date fair value)	Shares			Weighted-average grant-date fair value
RSUs unvested at December 31, 2014	2,337		$	21.21
Granted during 2015	801		$	34.68
Vested during 2015	(1,047	)	$	18.96
Forfeited during 2015	(31	)	$	28.96
RSUs unvested at December 31, 2015	2,060		$	27.47

As of December 31, 2015, there was $23.2 million of total unrecognized compensation cost related to unvested RSUs that is expected to be recognized over a weighted-average period of 2.6 years. The fair value of RSUs is generally based on the market value of the Company’s shares on the date of grant. The total fair value of shares vested and not distributed for the years ended December 31, 2015, 2014 and 2013 was $3.3 million, $3.2 million and $4.3 million, respectively.

The following table summarizes stock option activity for the year ended December 31, 2015:

(in thousands, except weighted-average exercise price and contractual term)	Number outstanding			Weighted- average exercise price		Weighted- average remaining contractual term		Aggregate intrinsic value
Balance at December 31, 2014		686		$	20.18
Exercised during 2015		(554	)	$	18.40
Balance at December 31, 2015		132		$	27.66		8.0 years	$	1,091
Vested and expected to vest at December 31, 2015		132		$	27.66		8.0 years	$	1,091
Exercisable at December 31, 2015		66		$	27.66		8.0 years	$	545

As of December 31, 2015, there was $0.5 million of total unrecognized compensation cost related to unvested stock options of the Company that is expected to be recognized over a weighted-average period of 2.0 years.

Total intrinsic value of options exercised for the years ended December 31, 2015, 2014 and 2013 was $9.7 million, $7.0 million and $6.0 million, respectively. This intrinsic value represents the difference between the fair market value of the Company’s common stock on the date of exercise and the exercise price of each option.