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
	September 30,						September 30,
	2014			2013			2014		2013
Service cost	$	—		$	—		$	1	$	8
Interest cost	328			222			19		21
Expected return on plan assets	(539		)	(359		)	—		—
Prior service cost recognized	—			—			—		—
Recognized actuarial loss	59			114			18		70
Net periodic benefit cost (return)	$	(152	)	$	(23	)	$	38	$	99



	Pension Benefits						Other Benefits
	Nine Months Ended						Nine Months Ended
	September 30,						September 30,
	2014			2013			2014		2013
Service cost	$	—		$	—		$	13	$	21
Interest cost	964			597			65		48
Expected return on plan assets	(1,617		)	(979		)	—		—
Prior service cost recognized	—			—			—		—
Recognized actuarial loss	150			313			72		125
Net periodic benefit cost (return)	$	(503	)	$	(69	)	$	150	$	194

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 nine months ended September 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 September 30, 2014, there were 6,035 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 $24.54 and a weighted average remaining contractual life of 1.17 years.

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



	Shares		Weighted Average Exercise Price
Options outstanding at beginning of period	1,060,350		$	18.64
Granted	—		—
Exercised	(183,082	)	17.37
Forfeited	(1,899	)	20.77
Options outstanding at end of period	875,369		$	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 nine months ended September 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 nine months ended September 30, 2014, the Company reissued 146,035 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 $1,341 and $477 for the three months ended September 30, 2014 and 2013, respectively, and $3,162 and $955 for the nine months ended September 30, 2014 and 2013, respectively.