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Note 15 - Share-Based and Other Compensation Programs
 12 Months Ended
Dec. 31, 2019
Share-based Payment Arrangement [Abstract]  
Share-Based and Other Compensation Plans Share-Based and Other Compensation Programs
On May 10, 2017, our stockholders approved the Amended and Restated Equity Compensation Plan, which amended and restated the 2014 Equity Plan. In addition to the Amended and Restated Equity Compensation Plan, we also have awards outstanding under our 2008 Equity Plan and 1995 Equity Plan. The last awards granted pursuant to the 2008 Equity Plan and 1995 Equity Plan were granted in 2014 and 2008, respectively. All awards granted under the Equity Plans have been performance-based or time-based awards in the form of non-qualified stock options, restricted stock, RSUs, phantom stock, or stock appreciation rights. The maximum contractual term for stock options and similar instruments under the Equity Plans is 10 years, although awards of these instruments may be granted with shorter terms.
The Amended and Restated Equity Compensation Plan authorizes the issuance of up to 8,954,109 shares, plus such number of shares of common stock that were subject to awards outstanding under the 2014 Equity Plan and the 2008 Equity Plan prior to the effective date of the Amended and Restated Equity Plan that subsequently terminate, expire or are cancelled and become available for issuance under the Amended and Restated Equity Compensation Plan (“Prior Plan Shares”). There were 6,266,017 shares available for grant under the Amended and Restated Equity Compensation Plan as of December 31, 2019 (the “share reserve”), which includes Prior Plan Shares. Each grant of restricted stock, RSUs, or performance share awards under the Amended and Restated Equity Compensation Plan (other than those settled in cash) reduces the share reserve available for grant under the Amended and Restated Equity Compensation Plan by 1.31 shares for every share subject to such grant. Absent this share reserve adjustment for outstanding restricted stock, RSUs, phantom stock or performance share awards, our shares remaining available for grant under the Amended and Restated Equity Compensation Plan would have been 9,678,723 shares as of December 31, 2019. Awards under the Amended and Restated Equity Compensation Plan that provide for settlement solely in cash (and not common shares) do not count against the share reserve.
Most awards vest at the end of the performance or service period and will vest earlier under certain circumstances. In the event of a grantee’s death or disability, awards generally vest immediately. Upon retirement, awards generally vest immediately or at the end of the performance period, if any. Certain time-based RSU awards granted to officers under our Amended and Restated Equity Compensation Plan will vest in whole or in part in the event the grantee’s employment is terminated by us without cause or for “good reason.” Awards granted under the Equity Plans to officers and our non-employee directors provide for “double trigger” vesting in the event of a change of control. As a result, awards granted to officers will vest in connection with a change of control only in the event the grantee’s employment is terminated by us without cause or the grantee terminates employment for “good reason,” in each case within 90 days before or one year after the change of control. Awards to our non-employee directors will vest in connection with a change of control only in the event the grantee fails to be appointed to the board of directors of the surviving entity or is not nominated for reelection, or fails to be reelected after nomination, to the board of directors of the Company or the surviving entity, in each case at any time beginning upon the change of control and ending 90 days following the first meeting of the stockholders of the Company or the surviving entity after the change in control. In the event of a hypothetical change of control as of December 31, 2019, we estimate that the vesting of awards, assuming for purposes of this hypothetical that “double trigger” vesting occurred, would have resulted in a pretax accounting charge to us of approximately $21.4 million, representing the acceleration of compensation expense.
We use the Monte Carlo valuation model to determine the fair value of all cash-settled awards where stock price is a factor in determining the vesting, as well as for cash- or equity-settled performance awards where there exists a similar stock price-based market condition. The Monte Carlo valuation model incorporates multiple input variables, including expected life,
volatility, risk-free rate of return and dividend yield for each award to estimate the probability that a vesting condition will be achieved. In determining these assumptions for the Monte Carlo valuations, we consider historic and observable market data.
The following table summarizes the compensation cost recognized and additional information regarding all share-based awards for the years indicated:
 
Year Ended December 31,
(In thousands)
2019
 
2018
 
2017
Compensation cost recognized (1):
 
 
 
 
 
RSUs
$
20,694

 
$
16,591

 
$
12,207

Non-Qualified Stock Options
274

 
603

 
851

Phantom Stock
2

 
2

 
2

Employee Stock Purchase Plan
444

 
453

 
432

Total compensation cost recognized
21,414

 
17,649

 
13,492

Less: Costs deferred as acquisition costs
373

 
324

 
269

Stock-based compensation expense
$
21,041

 
$
17,325

 
$
13,223

______________________
(1)
Compensation cost is generally recognized over the periods that an employee provides service in exchange for the award. For purposes of calculating compensation cost recognized, we generally consider awards effectively vested (and we recognize the full compensation costs) when grantees become retirement eligible.
As of December 31, 2019, unrecognized compensation expense related to the unvested portion of all of our share-based awards was $24.8 million. Absent a change of control under the Equity Plans, this expense is expected to be recognized over a weighted-average period of approximately 1.9 years.
RSUs
Information with regard to RSUs to be settled in stock for the periods indicated is as follows:
 
Performance-Based
 
Time-Vested
 
Number of
Shares
 
Weighted-Average
Grant Date
Fair Value
 
Number of
Shares
 
Weighted-Average
Grant Date
Fair Value
Unvested, December 31, 2018 (1) 
2,692,949

 
$
14.32

 
704,062

 
$
16.51

Granted (2) 
656,854

 
$
21.45

 
380,568

 
$
22.76

Performance adjustment (3) 
400,757

 
$
—

 
—

 
$
—

Vested (4) 
(1,246,824
)
 
$
8.43

 
(368,325
)
 
$
16.81

Forfeited
(55,389
)
 
$
17.81

 
(18,729
)
 
$
18.31

Unvested, December 31, 2019 (1) 
2,448,347

 
$
17.03

 
697,576

 
$
19.72


______________________
(1)
The final amount of RSUs distributed depends on the level of performance achieved along with each employee’s continued service through the vest date, which could result in changes in vested RSUs.
(2)
For performance-based RSUs, amount represents the probable outcome at grant date.
(3)
Represents an adjustment to the number of unvested performance-based RSUs due to changes during the period in our estimated payouts, which can range from 0 to 200% of target depending on results over the applicable performance periods.
(4)
Represents amounts vested during the year, which can include both original shares granted and the impact of performance adjustments.
The weighted-average grant date fair value of RSUs granted during 2018 and 2017 was $15.43 and $16.60, respectively. The fair value as of the respective vesting dates of RSUs vested during 2019, 2018 and 2017 was $36.2 million, $3.3 million, and $1.4 million, respectively.
Performance-Based RSUs. In 2019, 2018 and 2017, executive and non-executive officers were granted performance-based RSUs to be settled in common stock with target awards totaling 486,540, 595,320, and 456,510 RSUs, respectively. The maximum payout at the end of the three-year performance period is 200% of a grantee’s target number of RSUs. The maximum payout for awards based on the TSR Measures described below is generally subject to a maximum cap of six times the value of the grantee’s target award on the grant date. Performance-based RSUs granted to executive officers are subject to a one-year post vesting holding period.
In 2019 and 2018, the vesting of the performance-based RSUs granted to each executive officer and non-executive will be based upon the cumulative growth in Radian’s book value per share, adjusted for certain defined items, over a three-year performance period. In 2017, approximately 50% of the performance-based RSUs granted to each executive and non-executive officer will vest based on the cumulative growth in Radian book value per share, adjusted for certain defined items over a three-year period. The vesting of the remaining 50% of each performance-based RSU granted in 2017 is dependent upon: (i) Radian Group’s total stockholder return (“TSR”) compared to the median TSR of a designated peer group of companies as of the date of grant and (ii) Radian Group’s absolute TSR, in each case measured over a three-year performance period and subject to certain conditions.
The grant date fair value of the performance-based RSUs that are based on the cumulative growth in Radian’s book value per share is calculated based on the stock price as of the grant date, discounted for executives for the one-year post-vesting holding period. The compensation cost that is recognized over the remaining requisite service period is based on our expectations of the probable level of achievement of the performance condition.
Time-Vested RSUs. With the exception of certain time-vested RSUs granted in 2019 and 2018 to non-employee directors, the time-vested RSU awards granted in 2019, 2018 and 2017 are scheduled to vest in: (i) pro rata installments on each of the first three anniversaries of the grant date or (ii) generally at the end of three years. Certain time-vested RSU awards granted in 2019 and 2018 to non-employee directors generally are subject to one-year cliff vesting.
Non-Qualified Stock Options
Information with regard to stock options for the periods indicated is as follows:
($ in thousands, except per-share amounts)
Number of
Shares
 
Weighted
Average
Exercise Price
Per Share
 
Weighted
Average
Remaining Contractual Term
 
Aggregate Intrinsic Value (1)
Outstanding, December 31, 2018
1,312,791

 
$
9.39

 
 
 
 
Granted
—

 
—

 
 
 
 
Exercised
(329,900
)
 
7.41

 
 
 
 
Forfeited
(1,344
)
 
12.25

 
 
 
 
Expired
—

 
—

 
 
 
 
Outstanding, December 31, 2019
981,547

 
10.05

 
4.0
 
$
14,833

Exercisable, December 31, 2019
853,041

 
$
9.73

 
3.7
 
$
13,163

Available for grant, December 31, 2019
6,266,017

 
 
 
 
 
 

______________________
(1)
Based on the market price of $25.16 at December 31, 2019.
The following table summarizes additional information concerning stock option activity for the periods indicated:
 
Years Ended December 31,
($ in thousands, except per-share amounts)
2019
 
2018
 
2017
Aggregate intrinsic value of options exercised
$
4,984

 
$
6,274

 
$
14,389

Tax benefit of options exercised
1,047

 
1,318

 
5,036

Cash received from options exercised
2,416

 
1,425

 
7,131


Upon the exercise of stock options, we generally issue shares from the authorized, unissued share reserves when the exercise price is less than the treasury stock repurchase price and from treasury stock when the exercise price is greater than the treasury stock repurchase price.
The following table summarizes information concerning outstanding and exercisable options at December 31, 2019:
 
Options Outstanding
 
Options Exercisable
Range of Exercise Prices
Number
Outstanding
 
Weighted Average
Remaining
Contractual Life
(Years)
 
Weighted Average
Exercise Price
 
Number
Exercisable
 
Weighted Average
Exercise Price
$2.45 - $3.58
377,117

 
2.4
 
$
2.45

 
377,117

 
$
2.45

$10.42 - $15.44
449,976

 
4.9
 
$
13.54

 
321,470

 
$
14.09

$18.42
154,454

 
5.3
 
$
18.42

 
154,454

 
$
18.42

 
981,547

 
4.0
 
$
10.05

 
853,041

 
$
9.73


Generally, the stock option awards have a four-year vesting period, with 50% of the award vesting on or after the third anniversary of the grant date and the remaining 50% of the award vesting on or after the fourth anniversary of the grant date, provided the applicable stock price performance hurdle is met. The fair value of stock options vested during the year ended December 31, 2019 was $30 thousand, as compared to $1.3 million in 2018 and $3.3 million in 2017.
There were no stock options granted in 2017, 2018 and 2019.
Employee Stock Purchase Plan
On May 9, 2018, stockholders of Radian approved the Amended and Restated Radian Group Inc. ESPP, which amended and restated the Radian Group Inc. 2008 Employee Stock Purchase Plan. Under this plan, we issued 107,009; 103,668; and 105,476 shares to employees during the years ended December 31, 2019, 2018 and 2017, respectively, and when amended in 2018, an additional 1,250,000 shares of our authorized but unissued common stock were reserved for issuance. In January 2020, we issued 39,332 shares from the shares available for issuance under our Amended and Restated Radian Group Inc. ESPP. As a result, 1,902,459 shares currently remain available for issuance under the Amended and Restated Radian Group Inc. ESPP.
The Amended and Restated Radian Group Inc. ESPP is designed to allow eligible employees to purchase shares of our common stock at a discount of 15% off the lower of the fair market value of our common stock at the beginning or end of a six-month offering period (each period being the first and second six months in a calendar year).
The following assumptions were used in our calculation of Employee Stock Purchase Plan compensation expense during 2019:
 
January 1, 2019
 
July 1, 2019
Expected life
6 months

 
6 months

Risk-free interest rate
2.76
%
 
2.18
%
Volatility
36.24
%
 
27.90
%
Dividend yield
0.06
%
 
0.04
%