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
	June 30,						June 30,
	2014			2013			2014		2013
Service cost	$	—		$	—		$	6	$	6
Interest cost	318			187			23		15
Expected return on plan assets	(539		)	(309		)	—		—
Prior service cost recognized	—			—			—		—
Recognized actuarial loss	46			102			27		36
Net periodic benefit cost (return)	$	(175	)	$	(20	)	$	56	$	57



	Pension Benefits						Other Benefits
	Six Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014		2013
Service cost	$	—		$	—		$	12	$	13
Interest cost	636			375			46		27
Expected return on plan assets	(1,078		)	(620		)	—		—
Prior service cost recognized	—			—			—		—
Recognized actuarial loss	91			199			54		55
Net periodic benefit cost (return)	$	(351	)	$	(46	)	$	112	$	95

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. There were no stock options granted during the six months ended June 30, 2014. The fair value of stock option grants is estimated on the grant date using the Black-Scholes option-pricing model. The Company employed the following assumptions with respect to its stock option grants in 2013:



	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 these plans. At June 30, 2014, there were 6,934 remaining shares of the Company's common stock outstanding related to the First M&F Equity Incentive Plan and Stock Option Plan. The remaining options have a weighted average exercise price of $24.61 and a weighted average remaining contractual life of 1.24 years.

The following table summarizes the changes in stock options as of and for the six months ended June 30, 2014:



	Shares		Weighted Average Exercise Price
Options outstanding at beginning of period	1,060,350		$	18.64
Assumed from acquisition	—		—
Granted	—		—
Exercised	(144,105	)	17.01
Forfeited	(1,000	)	16.91
Options outstanding at end of period	915,245		$	18.90

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 award is the closing price of the Company's common stock on the day immediately preceding the award date. The following table summarizes the changes in restricted stock as of and for the six months ended June 30, 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
Awarded	78,250		31.46		34,336		30.26
Vested	(69,850	)	19.14		(6,338	)	22.09
Cancelled	—		—		—		—
Nonvested at end of period	78,250		$	31.46	50,336		$	28.64

During the six months ended June 30, 2014, the Company reissued 131,973 shares from treasury in connection with the exercise of stock options and award of restricted stock. The Company recorded total stock-based compensation expense of $951 and $477 for the three months ended June 30, 2014 and 2013, respectively, and $1,822 and $955 for the six months ended June 30, 2014 and 2013, respectively.