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Stock Incentive Plans
6 Months Ended
Jun. 30, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock Incentive Plans

10. STOCK INCENTIVE PLANS    

Restricted Stock

The Corporation issues restricted stock awards, consisting of both restricted stock and restricted stock units, to key employees under its Incentive Compensation Plans (Plans). The Corporation issues time-based awards and performance-based awards under these Plans, both of which are based on a three-year vesting period. The grant date fair value of the time-based awards is equal to the price of the Corporation’s common stock on the grant date. The fair value of the performance-based awards is based on a Monte-Carlo Simulation valuation of the Corporation’s common stock as of the grant date.

The Corporation issued 277,174 and 139,046 performance-based restricted stock units during the first six months of 2016 and 2015, respectively. Recipients will earn shares, totaling between 0% and 175% of the number of units issued, based on the Corporation’s total stockholder return relative to a specified peer group of financial institutions over the three-year period. These market-based restricted stock units are included in the table below as if the recipients earned shares equal to 100% of the units issued.

Prior to 2014, more than half of the restricted stock awards granted to management were earned if the Corporation met or exceeded certain financial performance results when compared to its peers. These performance-related awards were expensed ratably from the date that the likelihood of meeting the performance measure was probable through the end of a four-year vesting period. The service-based awards were expensed ratably over a three-year vesting period. The Corporation also issued discretionary service-based awards to certain employees that vested over five years.

For the six months ended June 30, 2016 and 2015, the Corporation issued 571,322 and 401,510 restricted stock awards, respectively, with aggregated grant date fair values of $7.3 million and $5.3 million under these plans. As of June 30, 2016, the Corporation had available up to 3,249,655 shares of common stock to issue under the Plans.

The unvested restricted stock awards are eligible to receive cash dividends or dividend equivalents which are ultimately used to purchase additional shares of stock and are subject to forfeiture if the requisite service period is not completed or the specified performance criteria are not met. These awards are subject to certain accelerated vesting provisions upon retirement, death, disability or in the event of a change of control as defined in the award agreements.

 

The following table summarizes the activity relating to restricted stock awards during the periods indicated:

 

     Six Months Ended June 30,  
     2016      2015  
     Awards      Weighted
Average
Grant
Price
     Awards      Weighted
Average
Grant
Price
 

Unvested awards outstanding at beginning of period

     1,548,444       $ 12.85         1,354,093       $ 11.86   

Granted

     571,322         12.86         401,510         13.16   

Net adjustment due to performance

     —           —           (46,956      10.25   

Vested

     (372,928      12.10         (460,606      10.61   

Forfeited

     (20,230      12.97         (2,774      17.24   

Dividend reinvestment

     27,210         12.30         18,359         14.13   
  

 

 

       

 

 

    

Unvested awards outstanding at end of period

     1,753,818         13.01         1,263,626         12.82   
  

 

 

       

 

 

    

The following table provides certain information related to restricted stock awards:

 

(in thousands)    Six Months Ended
June 30,
 
     2016      2015  

Share-based compensation expense

   $ 2,916       $ 1,564   

Tax benefit related to share-based compensation expense

     1,021         548   

Fair value of awards vested

     4,542         5,770   

As of June 30, 2016, there was $13.4 million of unrecognized compensation cost related to unvested restricted stock awards, including $525,000 that is subject to accelerated vesting under the Plan’s immediate vesting upon retirement provision for awards granted prior to the adoption of ASC 718, Compensation – Stock Compensation. The components of the restricted stock awards as of June 30, 2016 are as follows:

 

(dollars in thousands)    Service-
Based

Awards
     Performance-
Based
Awards
     Total  

Unvested restricted stock awards

     844,539         909,279         1,753,818   

Unrecognized compensation expense

   $ 6,341       $ 7,014       $ 13,355   

Intrinsic value

   $ 10,591       $ 11,402       $ 21,993   

Weighted average remaining life (in years)

     2.24         2.36         2.30   

Stock Options

All outstanding stock options were assumed in connection with certain of the Corporation’s completed acquisitions and are fully vested. Upon consummation of those acquisitions, all outstanding stock options issued by the acquired companies were converted into equivalent Corporation stock options. The Corporation issues shares of treasury stock or authorized but unissued shares to satisfy stock options exercised.

 

The following table summarizes the activity relating to stock options during the periods indicated:

 

     Six Months Ended June 30,  
     2016      2015  
     Shares      Weighted
Average
Exercise
Price
     Shares      Weighted
Average
Exercise
Price
 

Options outstanding at beginning of period

     435,340       $ 8.86         568,834       $ 8.86   

Assumed from acquisitions

     1,707,036         7.83         —           —     

Exercised

     (287,787      7.11         (82,810      5.57   

Forfeited

     (93,391      6.73         (2,182      4.34   
  

 

 

       

 

 

    

Options outstanding and exercisable at end of period

     1,761,198         8.26         483,842         9.44   
  

 

 

       

 

 

    

The intrinsic value of outstanding and exercisable stock options at June 30, 2016 was $8.0 million.

Warrants

In conjunction with its participation in the U.S. Department of the Treasury’s (UST) Capital Purchase Program (CPP), the Corporation issued to the UST a warrant to purchase up to 1,302,083 shares of the Corporation’s common stock. Pursuant to Section 13(H) of the Warrant to Purchase Common Stock, the number of shares of common stock issuable upon exercise of the warrant was reduced in half to 651,042 shares on June 16, 2009, the date the Corporation completed a public offering. The warrant, which expires in 2019, was sold at auction by the UST and has an exercise price of $11.52 per share.

In conjunction with the Annapolis Bancorp, Inc. (ANNB) acquisition on April 6, 2013, the warrant issued by ANNB to the UST under the CPP has been converted into a warrant to purchase up to 342,564 shares of the Corporation’s common stock at an exercise price of $3.57 per share. Subsequent adjustments related to actual dividends paid by the Corporation have increased the share amount of these warrants to 383,491, with a resulting lower exercise price of $3.19 per share as of June 30, 2016. The warrant, which was recorded at its fair value on April 6, 2013, was sold at auction by the UST and expires in 2019.