Note 9 Stock-based Compensation and Benefits

The Company provides stock-based compensation in accordance with shareholder-approved plans. During the second quarter of 2014, shareholders approved the 2014 Omnibus Incentive Plan (the "2014 Plan"). The 2014 Plan replaces the NBH Holdings Corp. 2009 Equity Incentive Plan (the "Prior Plan"), pursuant to which the Company granted equity awards prior to the approval of the 2014 Plan. Pursuant to the 2014 Plan, the Compensation Committee of the Board of Directors has the authority to grant, from time to time, awards of stock options, stock appreciation rights, restricted stock, performance stock units, market-based stock units, other stock-based awards, or any combination thereof to eligible persons.

As of June 30, 2016, the aggregate number of shares of Class A common stock available for issuance under the 2014 Plan is 5,073,073 shares. Any shares that are subject to stock options or stock appreciation rights under the 2014 Plan will be counted against the amount available for issuance as one share for every one share granted, and any shares that are subject to awards under the 2014 Plan other than stock options or stock appreciation rights will be counted against the amount available for issuance as 3.25 shares for every one share granted. The 2014 Plan provides for recycling of shares from both the Prior Plan and the 2014 Plan, the terms of which are further described in the Company's Proxy Statement for its 2014 Annual Meeting of Shareholders.

To date, the Company has issued stock options, restricted stock, and performance stock units under the plans. The Compensation Committee sets the option exercise price at the time of grant, but in no case is the exercise price less than the fair market value of a share of stock at the date of grant.

Stock options

The Company issued stock options in accordance with the 2014 Plan during the six months ended June 30, 2016. The options granted during the six months ended June 30, 2016 are time-vesting over a 3-year period.

The expense associated with the awarded stock options was measured at fair value using a Black-Scholes option-pricing model. The outstanding option awards vest on a graded basis over 1-4 years of continuous service and have 7-10 year contractual terms.

The following table summarizes stock option activity for the six months ended June 30, 2016:


				Weighted
				Average
		Weighted		Remaining
		Average		Contractual	Aggregate
		Exercise		Term in	Intrinsic
	Options	Price		Years	Value
Outstanding at December 31, 2015	2,596,251	$	19.84	4.77	$	3,968
Granted	167,163		19.57
Forfeited	(21,480)		18.86
Surrendered	(35,841)		20.54
Exercised	(842)		20.53
Expired	(1,499)		19.82
Outstanding at June 30, 2016	2,703,752	$	19.82	4.50	$	1,433
Options exercisable at June 30, 2016	2,346,123	$	19.91	3.83	$	364
Options expected to vest	352,816	$	19.34	8.48	$	1,352

Stock option expense is included in salaries and benefits in the consolidated statements of operations and totaled $0.2 million for the three months ended June 30, 2016 and 2015, and $0.4 million and $0.3 million for the six months ended June 30, 2016 and 2015, respectively. At June 30, 2016, there was $0.9 million of total unrecognized compensation cost related to non-vested stock options granted under the plans. The cost is expected to be recognized over a weighted average period of 2.3 years.

Restricted stock awards

During the six months ended June 30, 2016, the Company granted restricted stock awards in accordance with the 2014 Plan totaling 84,091 shares. The restricted stock awards vest over a range of a 1 - 3 year period. The fair value of restricted stock awards is determined based on the closing stock price of Company common shares on the grant date. The weighted-average grant date fair value of the restricted stock awards granted was $19.61 per share. As of June 30, 2016, the total unrecognized compensation cost related to non-vested awards totaled $2.5 million, and is expected to be recognized over a weighted average period of approximately 1.96 years.

Market-based stock awards

During the six months ended June 30, 2016, the Company granted market-based stock awards of 26,594 shares in accordance with the 2014 Plan. These shares have a five-year performance period. The restricted stock shares vest upon the later of the Company’s stock price achieving an established price goal during the performance period, and the third anniversary of the date of grant. The fair value of these awards was determined using a Monte Carlo Simulation at grant date. The grant date fair value of these awards was $11.28. As of June 30, 2016, the total unrecognized compensation cost related to non-vested awards totaled $0.2 million, and is expected to be recognized over a weighted average period of approximately 2.7 years.

Performance stock units

During the six months ended June 30, 2016, the Company granted 91,342 performance stock units in accordance with the 2014 Plan. These performance stock units granted represent initial target awards and do not reflect potential increases or decreases resulting from the final performance results, which are to be determined at the end of the three-year performance period. The actual number of shares to be awarded at the end of the performance period will range from 0% - 150% of the initial target awards. 60% of the award is based on the Company’s cumulative earnings per share (EPS target) during the performance period, and 40% of the award is based on the Company’s cumulative total shareholder return (TSR target), or TSR, during the performance period. The Company’s TSR will be compared to the respective TSRs of the companies comprising the KBW Regional Index to determine the shares awarded. The fair value of the EPS target portion of the award was determined based on the closing stock price of the Company’s common stock on the grant date. The fair value of the TSR target portion of the award was determined using a Monte Carlo Simulation at the grant date. The weighted-average grant date fair value per unit of the EPS target portion and the TSR target portion was $19.56 and $16.52, respectively. As of June 30, 2016, the total unrecognized compensation cost related to non-vested units totaled $1.2 million, and is expected to be recognized over a weighted average period of approximately 2.7 years.

The following table summarizes restricted stock and performance stock activity for the six months ended June 30, 2016:


		Weighted				Weighted
	Restricted	Average Grant-		Performance		Average Grant-
	Shares	Date Fair Value		Stock Units		Date Fair Value
Unvested at December 31, 2015	836,031	$	15.42	—	$	—
Vested	(68,085)		18.93	—		—
Granted	110,685		18.92	91,342		18.22
Forfeited	(14,747)		18.86	(2,870)		18.22
Surrendered	(33,466)		19.93	—		—
Unvested at June 30, 2016	830,418	$	15.40	88,472	$	18.22

Expense related to non-vested restricted awards and units totaled $0.7 million during the three months ended June 30, 2016 and 2015, and $1.4 million and $1.2 million during the six months ended June 30, 2016 and 2015, respectively, and is included in salaries and benefits in the consolidated statements of operations.

Employee Stock Purchase Plan

The 2014 Employee Stock Purchase Plan (“ESPP”) is intended to be a qualified plan within the meaning of Section 423 of the Internal Revenue Code of 1986 and allows eligible employees to purchase shares of common stock through payroll deductions up to a limit of $25,000 per calendar year and 2,000 shares per offering period. The price an employee pays for shares is 90.0% of the fair market value of Company common stock on the last day of the offering period. The offering periods is the six-month period commencing on March 1 and September 1 of each year and ending on August 31 and February 28 (or February 29 in the case of a leap year) of each year. There is no vesting or other restrictions on the stock purchased by employees under the ESPP. Under the ESPP, the total number of shares of common stock reserved for issuance totaled 400,000 shares.

Under the ESPP, employees purchased 10,458 shares during the six months ended June 30, 2016. There were 375,057 shares available for issuance under the ESPP at June 30, 2016.