Share-Based Plans

Webster maintains stock compensation plans (collectively, the "Plans") under which non-qualified stock options, incentive stock options, restricted stock, restricted stock units, or stock appreciation rights may be granted to employees and directors. The Company believes these share awards better align the interests of its employees with those of its shareholders. Stock compensation cost is recognized over the required service vesting period for the awards, based on the grant-date fair value, net of estimated forfeitures, and is included as a component of compensation and benefits reflected in non-interest expense. The Plans have shareholder approval for up to 10.9 million shares of common stock. At December 31, 2015, there were 1.3 million common shares remaining available for grant, while no stock appreciation rights have been granted.

The following table provides a summary of stock compensation expense, and the related income tax benefit, recognized in the accompanying Consolidated Statements of Income:



	Years ended December 31,
(In thousands)	2015		2014		2013
Stock options	$	379	$	1,175	$	3,902
Restricted stock	10,556		9,048		6,762
Total stock compensation expense	$	10,935	$	10,223	$	10,664

Income tax benefit	$	3,903	$	3,553	$	5,344

The following table provides a summary of unrecognized stock compensation expense:



	At December 31, 2015
(Dollars in thousands)	Unrecognized Compensation Expense		Weighted-Average Period To Be Recognized
Stock options	$	43	0.1 years
Restricted stock	$	10,937	1.9 years

The following table provides a summary of the activity under the Plans for the year ended December 31, 2015:



	Unvested Restricted Stock Awards												Stock Options Outstanding
	Time-Based								Performance-Based				Stock Options Outstanding
	Number of Shares		Weighted-Average Grant Date Fair Value		Number of Units		Weighted-Average Grant Date Fair Value		Number of Shares		Weighted-Average Grant Date Fair Value		Number of Shares		Weighted-Average Exercise Price
Balance at January 1, 2015	243,015		$	27.03	2,279		$	29.34	130,193		$	28.61	1,900,144		$	24.95
Granted	223,190		34.82		12,531		34.45		138,591		36.15		—		—
Exercised options	—		—		—		—		—		—		(221,320	)	18.09
Vested restricted stock awards ⁽¹⁾	(220,866	)	28.83		(12,722	)	33.53		(153,063	)	31.27		—		—
Forfeited	(9,194	)	30.27		—		—		—		—		(151,750	)	45.36
Balance at December 31, 2015	236,145		$	32.58	2,088		$	34.45	115,721		$	34.14	1,527,074		$	23.92

Options exercisable, at December 31, 2015													1,420,758		$	23.99
Options expected to vest, at December 31, 2015													105,378		$	23.00

(1) Vested for purposes of recording compensation expense.

Time-based restricted stock. Time-based restricted stock awards vest over the applicable service period ranging from one to five years. The Plans limit the number of time-based awards that may be granted to an eligible individual in a calendar year to 100,000 shares. Compensation expense is recorded over the vesting period based on fair value, which is measured using the Company's common stock closing price at the date of grant.

Performance-based restricted stock. Performance-based restricted stock awards vest after a three year performance period, with share quantity dependent on that performance. Awards granted in 2015 and 2014 vest in a range from zero to150% while previous awards vest in a range from zero to 200% of the target number of shares under the grant. The performance-based shares granted in 2015 vest, 50% based upon Webster's ranking for total shareholder return versus Webster's compensation peer group companies and 50% upon Webster's average of return on equity for each year during the three year vesting period. The compensation peer group companies are utilized because they represent the financial institutions that best compare with Webster. The Company records compensation expense over the vesting period, based on a fair value calculated using the Monte-Carlo simulation model, which allows for the incorporation of the performance condition for the 50% of the performance-based shares tied to total shareholder return versus the compensation peer group, and based on a fair value of the market price on the date of grant for the remaining 50% of the performance-based shares tied to Webster's return on equity. Compensation expense is subject to adjustment based on management's assessment of Webster's return on equity performance relative to the target number of shares condition.

The total fair value of restricted stock awards vested during the years ended December 31, 2015, 2014, and 2013 was $11.6 million, $9.4 million, and $5.1 million, respectively.

Stock options. Stock option awards have an exercise price equal to the market price of Webster's stock on the date of grant and vest over periods ranging from three to four years. Each option grants the holder the right to acquire a share of Webster common stock over a contractual life of up to ten years.

There were no stock options granted for 2015 and 2014. The fair value of each option award for 2013 was $10.96, as estimated on the date of grant using the Black-Scholes Option-Pricing Model using the following weighted-average assumptions: 6.9 years expected term; 1.80% expected dividend yield; 10.00% expected forfeiture rate; 58.97% expected volatility; and a 1.36% risk-free interest rate. The weighted-average remaining contractual term for options expected to vest at December 31, 2015 was 7.2 years.

These assumptions can be highly subjective and therefore, Webster uses historical data within the valuation model. The expected term of options granted is derived from actual option exercise and employee termination tendencies. The expected dividend yield is based on the current annual dividend on a current stock price. The expected forfeiture rate is calculated based on actual forfeiture activity trends. The expected volatility is derived from historical returns of the daily closing stock price over periods of time equal to the duration of the expected term of options granted. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant for periods that coincide with the contractual life of the option.

Aggregate intrinsic value represents the total pretax intrinsic value (the difference between Webster's closing stock price on the last trading day of the year and the weighted-average exercise price, multiplied by the number of shares) that would have been received by the option holders had all option holders exercised their options at that time. At December 31, 2015, the aggregate intrinsic value of options outstanding, options exercisable, and options expected to vest was $22.5 million, $21.0 million, and $1.5 million, respectively. The total intrinsic value of options exercised during the years ended December 31, 2015, 2014, and 2013 was $4.3 million, $1.9 million, and $1.8 million, respectively.

There were 1,388,957 non-qualified stock options and 138,117 incentive stock options outstanding at December 31, 2015.

The following table summarizes information about options outstanding and options exercisable at December 31, 2015:



	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number of Shares	Weighted-Average Remaining Contractual Life (years)	Weighted-Average Exercise Price		Number of Shares	Weighted-Average Remaining Contractual Life (years)	Weighted-Average Exercise Price
$ 5.14 - 20.00	448,941	3.2	$	9.67	448,941	3.2	$	9.67
$ 20.01 - 30.00	672,339	6.1	23.54		566,023	5.9	23.65
$ 30.01 - 40.00	192,518	2.0	32.03		192,518	2.0	32.03
$ 40.01 - 48.88	213,276	1.0	47.77		213,276	1.0	47.77
	1,527,074	4.0	$	23.92	1,420,758	3.8	$	23.99