11. EMPLOYEE BENEFITS

The Company has a discretionary noncontributory profit sharing plan, which features an employee stock ownership plan. This plan is for the benefit of substantially all eligible officers and employees of the Company and its subsidiaries. The Company has accrued and anticipates making a discretionary payment of $1.5 million in March 2017, for 2016. A $1.5 million contribution was paid in 2016, for 2015. A $2.0 million contribution was paid in 2015, for 2014.

The Company has a qualified 401(k) profit sharing plan that permits participants to make contributions by salary deduction. The Company made a matching contribution to this plan of $6.4 million in 2016, for 2015 and $5.7 million in 2015, for 2014. The Company anticipates making a matching contribution of $7.0 million in March 2017, for 2016.

The Company recognized $2.1 million, $2.2 million, and $2.0 million in expense related to outstanding stock options and $9.2 million, $8.1 million, and $7.2 million in expense related to outstanding restricted stock grants for the years ended December 31, 2016, 2015, and 2014, respectively. The Company had $4.7 million of unrecognized compensation expense related to the outstanding options and $18.6 million of unrecognized compensation expense related to outstanding restricted stock grants at December 31, 2016.

2002 Incentive Stock Option Plan

On April 18, 2002, the shareholders of the Company approved the 2002 Incentive Stock Options Plan (the 2002 Plan), which provides incentive options to certain key employees to receive up to 2 million common shares of the Company. All options that are issued under the 2002 Plan terminate after 10 years (except for any option granted to a person holding more than 10 percent of the Company’s stock, in which case the option terminates after five years). All options issued prior to 2005, under the 2002 Plan, could not be exercised until at least four years and 11 months after the date they are granted. Options issued in 2006, 2007, and 2008 under the 2002 Plan, have a vesting schedule of 50 percent after three years; 75 percent after four years and 100 percent after four years and 11 months. Except under circumstances of death, disability or certain retirements, the options cannot be exercised after the grantee has left the employment of the Company or its subsidiaries. The exercise period for an option may be accelerated upon the optionee’s qualified disability, retirement or death. All options expire at the end of the exercise period. Prior to 2006, the Company made no recognition in the Company’s Consolidated Balance Sheets of the options until such options were exercised and no amounts applicable thereto were reflected in net income as all options were granted at strike prices at the then current fair value of the underlying shares. For options granted after January 1, 2006, compensation expense is recognized on unvested options outstanding. Options are granted at exercise prices of no less than 100 percent of the fair market value of the underlying shares based on the fair value of the option at date of grant. On January 25, 2011, the Board amended and froze the 2002 Plan such that no shares of Company stock shall thereafter be available for grants under the 2002 Plan. Existing awards granted under the 2002 Plan will continue in accordance with their terms under the 2002 Plan. The 2002 Plan expired without modification on April 17, 2012.

The table below discloses the information relating to option activity in 2016, under the 2002 Plan:


	Number of Shares			Weighted Average Price Per Share		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Stock Options Under the 2002 Plan
Outstanding - December 31, 2015		180,436		$	38.61
Granted		—			—
Expired		(9,203	)		37.46
Exercised		(79,772	)		37.56

Outstanding - December 31, 2016		91,461		$	39.63		1.4	$	3,428,895

Exercisable - December 31, 2016		91,461		$	39.63		1.4	$	3,428,895

No options were granted under the 2002 Plan during 2016, 2015, or 2014. The total intrinsic value of options exercised during the year ended December 31, 2016, 2015, and 2014 was $2.3 million, $1.1 million, and $2.0 million, respectively. As of December 31, 2016, there was no unrecognized compensation cost related to the nonvested options.

Long-Term Incentive Compensation Plan

At the April 26, 2005, shareholders’ meeting, the shareholders of the Company approved the UMB Financial Corporation Long-Term Incentive Compensation Plan (LTIP) which became effective as of January 1, 2005. The LTIP permits the issuance to selected officers of the Company service-based restricted stock grants, performance-based restricted stock grants and non-qualified stock options. Service-based restricted stock grants contain a service requirement. The performance-based restricted grants contain performance and service requirements. The non-qualified stock option grants contain a service requirement.

At the April 23, 2013 shareholders’ meeting, the shareholders of the Company approved amendments to the LTIP Plan, including increasing the number of shares of the Company’s stock reserved for issuance under the Plan from 5.25 million shares to 7.44 million shares. Additionally, the shareholders approved increasing the maximum benefits any one eligible employee may receive under the plan during any one fiscal year from $1 million to $2 million taking into account the value of all stock options and restricted stock received.

The service-based restricted stock grants contain a service requirement with varying vesting schedules. The majority of these grants issued prior to 2016 utilize a vesting schedule in which 50 percent of the shares vest after three years of service, 75 percent after four years of service and 100 percent after five years of service. The majority of these grants issued in 2016 utilize a vesting schedule in which 50 percent of the shares vest after two years of service, 75 percent after three years of service and 100 percent after four years of service. Certain other grants utilize vesting schedules in which the grants vest ratably over the requisite service period or contain a three-year cliff vesting.

The performance-based restricted stock grants contain a service and a performance requirement. The performance requirement is based on a predetermined performance requirement over a three year period. The service requirement portion is a three year cliff vesting. If the performance requirement is not met, the participants do not receive the shares.

The dividends on service and performance-based restricted stock grants are treated as two separate transactions. First, cash dividends are paid on the restricted stock. Those cash dividends are then paid to purchase additional shares of restricted stock. Dividends earned as additional shares of restricted stock have the same terms as the associated grant. The dividends paid on the stock are recorded as a reduction to retained earnings (similar to all dividend transactions).

The table below discloses the status of the service-based restricted shares during 2016:


	Number of Shares			Weighted Average Grant Date Fair Value
Service-Based Restricted Stock
Nonvested - December 31, 2015		534,619		$	50.95
Granted		188,921			48.57
Canceled		(49,058	)		50.56
Vested		(149,967	)		48.82

Nonvested - December 31, 2016		524,515		$	50.74

As of December 31, 2016, there was $16.0 million of unrecognized compensation cost related to the nonvested shares. The cost is expected to be recognized over a period of 2.7 years. Total fair value of shares vested during the year ended December 31, 2016, 2015, and 2014 was $7.4 million, $7.2 million, and $5.6 million, respectively.

The table below discloses the status of the performance-based restricted shares during 2016:


	Number of Shares			Weighted Average Grant Date Fair Value
Performance-Based Restricted Stock
Nonvested - December 31, 2015		101,934		$	51.27
Granted		62,725			47.68
Canceled		(22,507	)		50.36
Vested		(23,466	)		45.58

Nonvested - December 31, 2016		118,686		$	50.67

As of December 31, 2016, there was $2.6 million of unrecognized compensation cost related to the nonvested shares. The cost is expected to be recognized over a period of 1.8 years. Total fair value of shares vested during the years ended December 31, 2016, 2015 and 2014, was $1.0 million, $1.9 million and $2.3 million, respectively.

The non-qualified stock options carry a service requirement and grants issued prior to 2016 will vest 50 percent after three years, 75 percent after four years and 100 percent after five years, while grants issued in 2016 will vest 50 percent after two years, 75 percent after three years and 100 percent after four years.

The table below discloses the information relating to non-qualified option activity in 2016 under the LTIP:


	Number of Shares			Weighted Average Price Per Share		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Stock Options Under the LTIP
Outstanding - December 31, 2015		1,339,747		$	45.73
Granted		244,076			47.68
Canceled		(88,183	)		50.93
Expired		(17,037	)		45.46
Exercised		(314,754	)		40.72

Outstanding - December 31, 2016		1,163,849		$	47.10		6.3	$	34,937,533

Exercisable - December 31, 2016		407,366		$	40.86		3.8	$	14,772,695

The Company uses the Black-Scholes pricing model to determine the fair value of its options. The assumptions for stock-based awards in the past three years utilized in the model are shown in the table below.


	2016			2015			2014
Black-Scholes pricing model:
Weighted average fair value of the granted option	$	9.90		$	11.95		$	13.03
Weighted average risk-free interest rate		1.30	%		1.62	%		1.77	%
Expected option life in years		6.25			6.25			6.25
Expected volatility		25.71	%		26.73	%		24.87	%
Expected dividend yield		2.02	%		1.74	%		1.53	%

The expected option life is derived from historical exercise patterns and represents the amount of time that options granted are expected to be outstanding. The expected volatility is based on historical volatilities of the Company’s stock. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

The weighted average grant-date fair value of options granted during the years 2016, 2015, and 2014 was $9.90, $11.95, and $13.03, respectively. The total intrinsic value of options exercised during the years ended December 31, 2016, 2015 and 2014, was $5.8 million, $2.6 million and $3.7 million, respectively. As of December 31, 2016, there was $4.7 million of unrecognized compensation cost related to the nonvested options. The cost is expected to be recognized over a period of 2.7 years.

Cash received from options exercised under all share based compensation plans was $15.8 million, $10.5 million, and $8.0 million for the years ended December 31, 2016, 2015, and 2014, respectively. The tax benefit realized for stock options exercised was $1.1 million in 2016. This 2016 tax benefit was recognized in the Company’s Consolidated Statements of Income due to the Company’s adoption of ASU No. 2016-09 with an effective date of January 1, 2016. See further discussion of this ASU in Note 2, “New Accounting Pronouncements.” The tax benefit realized for stock options exercised was $0.9 million in 2015 and $1.9 million in 2014, both of which were recognized in the Company’s Consolidated Statements of Changes in Shareholder’s Equity.

The Company has no specific policy to repurchase common shares to mitigate the dilutive impact of options; however, the Company has historically made adequate discretionary repurchases of common shares in an amount that exceeds stock option exercise activity. See a description of the Company’s share repurchase plan in Note 13, “Common Stock and Earnings Per Share,” in the Notes to the Consolidated Financial Statements provided in Item 8, page 99 of this report.