Share-Based Compensation

The Corporation’s 2002, 2006 and 2011 Stock and Equity Plans, and the Citizens Republic Bancorp, Inc. Stock Compensation plan, and the Republic Bancorp, Inc 1998 Stock Option Plan that were assumed by the Corporation in connection with the Citizens acquisition (the “Plans”), provide stock options and restricted stock awards available to grant to employees for up to 5,298,056 shares of Common Stock of the Corporation. The Plans also provide for the granting of nonqualified stock options and nonvested (restricted) shares to certain nonemployee directors of the Corporation. Outstanding options under these Plans are generally not exercisable for twelve months from date of grant. The total share-based compensation expense recognized during the years ended December 31, 2015, 2014, and 2013, was $14.2 million, $13.9 million, and $10.9 million, respectively, and the related tax benefit was $5.0 million, $4.9 million, and $3.8 million, respectively. Share-based compensation expense related to awards granted to employees as well as awards granted to directors is recorded in salaries, wages, pension and employee benefits in the accompanying Consolidated Statements of Income.

Certain of the Corporation’s share-based award grants contain terms that provide for a graded vesting schedule whereby portions of the award vest in increments over the requisite service period. The Corporation has elected to recognize compensation expense for awards with graded vesting schedule on a straight-line basis over the service period for the entire award. Compensation expense is recognized based on the estimated number of stock options and awards for which service is to be rendered. Upon stock option exercise or stock unit conversion, it is the policy of the Corporation to issue shares from treasury stock. No open market repurchases of Common Stock are planned in the upcoming calendar year. The Corporation has the authority to issue shares well in excess of the total number of stock option and restricted stock awards available for grant.

In accordance with the Corporation’s stock option and nonvested (restricted) shares plans, employee participants that are 55 or older and have fifteen years of service are eligible to retire. Prior to the Plans’ amendments during 2007, which eliminated post retirement vesting, all unvested awards at the time of retirement continued to vest. The Corporation accelerates the recognition of compensation costs for share-based awards granted or modified to retirement-eligible employees and employees who become retirement-eligible. The compensation cost of these awards is recognized over the period up to the date the employee first becomes eligible to retire.

Stock Option Awards

Options under these Plans are granted with an exercise price equal to the market price of the Corporation’s shares at the date of grant; those option awards generally vest based on three years of continuous service and have a 10-year contractual term. Options granted as incentive stock options must be exercised within ten years and options granted as nonqualified stock options have terms established by the Compensation Committee of the Board and approved by the nonemployee directors of the Board. Upon termination, options are cancelable within defined periods based upon the reason for termination of employment.

The Black-Scholes option pricing model was used to estimate the fair market value of the options at the date of grant. This model was originally developed for use in estimating the fair value of traded options which have different characteristics from the Corporation’s employee stock options. Because of these differences, the Black-Scholes model is not a perfect indicator of value of an employee stock option, but it is commonly used for this purpose.

A summary of stock option activity under the Plans as of December 31, 2015, 2014, and 2013, and changes during the years then ended is as follows:



Options	Shares (000’s)		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value (000’s)
Outstanding at January 1, 2013	1,820		$	24.73	1.82	—
Acquired	63		218.01
Exercised	—		—
Forfeited	(8	)	23.93
Expired	(479	)	36.64
Outstanding at December 31, 2013	1,396		$	28.84	1.14	$	87
Exercised	—		—
Forfeited	—		—
Expired	(558	)	31.91
Outstanding at December 31, 2014	838		$	26.64	0.62	$	—
Exercised	—		—
Forfeited	—		—
Expired	(582	)	28.25
Outstanding at December 31, 2015	256		$	23.00	0.52	$	—
Exercisable at December 31, 2015	256		$	23.00	0.52	$	—

There were no options granted in the years ended December 31, 2015, 2014, and 2013. During the years ended December 31, 2015, 2014, and 2013, no options were exercised.

At December 31, 2015, there were no unrecognized compensation costs related to stock options granted to be realized under the Plans.

Nonvested (Restricted) Stock Awards

The market price of the Corporation’s Common Stock at the date of grant is used to estimate the fair value of nonvested (restricted) stock awards. A summary of the status of the Corporation’s nonvested shares as of December 31, 2015, 2014, and 2013, and changes during the years then ended, is as follows:



			Weighted-Average
			Grant Date
Nonvested (restricted) Stock Awards	Shares (000’s)		Fair Value
Nonvested at January 1, 2013	1,079		$	17.00
Granted	823		16.47
Vested	(508	)	17.90
Forfeited or expired	(52	)	16.89
Nonvested at December 31, 2013	1,342		$	16.34
Granted	777		19.67
Vested	(664	)	16.30
Forfeited or expired	(42	)	18.16
Nonvested at December 31, 2014	1,413		$	18.16
Granted	792		19.48
Vested	(711	)	18.95
Forfeited or expired	(88	)	18.99
Nonvested at December 31, 2015	1,406		$	19.10

At December 31, 2015, there was $16.4 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plans. That cost is expected to be recognized over a weighted-average period of 1.47 years. The total fair value of shares vested during the year ended December 31, 2015, 2014, and 2013, was $13.5 million, $10.8 million, and $9.1 million, respectively.