Employee Benefit and Deferred Compensation Plans

(In Thousands, Except Share Data)

The plan expense for the Company-sponsored noncontributory defined benefit pension plan (“Pension Benefits”) and post-retirement health and life plans (“Other Benefits”) for the periods presented was as follows:



	Pension Benefits						Other Benefits
	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2014			2013			2014		2013
Service cost	$	—		$	—		$	6	$	7
Interest cost	318			188			23		12
Expected return on plan assets	(539		)	(311		)	—		—
Prior service cost recognized	—			—			—		—
Recognized actuarial loss	45			97			27		19
Net periodic benefit cost (return)	$	(176	)	$	(26	)	$	56	$	38

There were no stock options granted during the three months ended March 31, 2014.

In January 2013, the Company granted stock options which generally vest and become exercisable in equal installments of 33 1/3% upon completion of one, two and three years of service measured from the grant date. The fair value of stock option grants is estimated on the grant date using the Black-Scholes option-pricing model. The Company employs the following assumptions with respect to its stock option grants in 2013:



	2014 Grant			2013 Grant
Shares granted	—			52,500
Dividend yield	—		%	3.55		%
Expected volatility	—		%	37		%
Risk-free interest rate	—		%	0.76		%
Expected lives				6 years
Weighted average exercise price	$	—		$	19.14
Weighted average fair value	$	—		$	4.47

In connection with its merger with First M&F during the third quarter of 2013, the Company assumed First M&F's 2005 Equity Incentive Plan and Stock Option Plan, under which options to purchase an aggregate of 11,557 shares of the Company's common stock were outstanding as of the date of assumption. The assumed options had a weighted average exercise price of $21.16 and a weighted average remaining contractual life of 2.05 years at the date of assumption. The fair value of the stock options assumed on the date of assumption was $68 and was estimated using the Black-Scholes option-pricing model. No additional options or other forms of equity incentives will be granted or awarded under this plan.

The following table summarizes the changes in stock option grants as of and for the three months ended March 31, 2014:



	Shares		Weighted Average Exercise Price
Options outstanding at beginning of period	1,060,350		$	18.64
Assumed from acquisition	—		—
Granted	—		—
Exercised	(61,567	)	14.63
Forfeited	—		—
Options outstanding at end of period	998,783		$	18.89

The Company awards performance-based restricted stock to executives and time-based restricted stock to directors and other officers and employees under a long-term equity incentive plan. The performance-based restricted stock vests upon completion of a one-year service period and the attainment of certain performance goals. Performance-based restricted stock is issued at the target level; the number of shares ultimately awarded is determined at the end of each year and may be increased or decreased depending on the Company falling short of, meeting or exceeding financial performance measures defined by the Board of Directors. Time-based restricted stock vests at the end of the service period defined in the respective grant. The fair value of each restricted stock grant is the closing price of the Company's common stock on the day immediately preceding the grant date. The following table summarizes the changes in restricted stock as of and for the three months ended March 31, 2014:



	Performance-Based Restricted Stock		Weighted Average Grant-Date Fair Value		Time- Based Restricted Stock	Weighted Average Grant-Date Fair Value
Nonvested at beginning of period	69,850		$	19.14	22,338	$	24.30
Granted	78,600		31.46		22,500	31.46
Vested	(69,850	)	19.14		—	—
Cancelled	—		—		—	—
Nonvested at end of period	78,600		$	31.46	44,838	$	27.89

During the three months ended March 31, 2014, the Company reissued 92,727 shares from treasury in connection with the exercise of stock options and issuance of restricted stock. The Company recorded total stock-based compensation expense of $871 and $478 for the three months ended March 31, 2014 and 2013, respectively.