Stock Compensation and Share Repurchase Plan

At the annual meeting on April 16, 2013, shareholders approved the Company's 2013 Incentive Plan (the “2013 Plan”), which,

among other things, authorizes the issuance of equity awards to directors and employees and reserves 4,000,000 shares of the

Company's common stock for issuance under the plan.

On June 17, 2011, the Company’s Compensation Committee modified restricted stock awards and option grants that were originally issued to fourteen executive officers on January 31, 2011, as follows:


•	Added performance vesting conditions linking total shareholder return, compared to the return of a regional bank stock total return index;


•	Awards will cliff vest after three years instead of time vest over a four year period, but only to the extent that the performance conditions are met; and


•	The modified grants will vest in whole or in part only if total shareholder return achieves specified targets, subject to prorated vesting upon death, disability, qualifying retirement, termination for good reason or a change of control.

As a result of the modification, there was no incremental compensation cost.

Stock Options

The following table summarizes information about stock option activity for the years ended December 31, 2013, 2012 and 2011:

(shares in thousands)



	2013				2012				2011

	Options		Weighted-Avg		Options		Weighted-Avg		Options		Weighted-Avg
	Outstanding		Exercise Price		Outstanding		Exercise Price		Outstanding		Exercise Price
Balance, beginning of period	1,850		$	15.37	2,151		$	14.48	2,067		$	14.82
Granted	—		$	—	20		$	11.98	237		$	11.01
Exercised	(515	)	$	12.42	(174	)	$	5.63	(40	)	$	7.67
Forfeited/expired	(354	)	$	17.46	(147	)	$	13.45	(113	)	$	15.72
Balance, end of period	981		$	16.17	1,850		$	15.37	2,151		$	14.48
Options exercisable, end of period	627		$	18.86	1,263		$	17.11	1,334		$	16.13

The following table summarizes information about outstanding stock options issued under all plans as of December 31, 2013:

(shares in thousands)



	Options Outstanding				Options Exercisable
		Weighted Avg.
		Remaining
Range of	Options	Contractual Life	Weighted Avg.		Options	Weighted Avg.
Exercise Prices	Outstanding	(Years)	Exercise Price		Exercisable	Exercise Price
$4.58 to $10.97	277	6.4	$	10.38	64	$	8.96
$11.53 to $12.87	252	6.2	$	12.05	121	$	11.93
$13.45 to $23.49	299	2.3	$	20.09	289	$	20.32
$24.25 to $28.425	153	1.9	$	25.77	153	$	25.77
	981	4.4	$	16.17	627	$	18.86

The compensation cost related to stock options, including costs related to unvested options assumed in connection with acquisitions, that has been charged against income (included in salaries and employee benefits) was $778,000, $1.1 million, and $1.2 million for the years ended December 31, 2013, 2012 and 2011, respectively.

The total income tax benefit recognized in the income statement related to stock options was $311,000, $448,000, and $463,000 for the years ended December 31, 2013, 2012 and 2011, respectively.

The total intrinsic value (which is the amount by which the stock price exceeds the exercise price) of both options outstanding and options exercisable as of December 31, 2013, was $4.7 million and $1.9 million, respectively.

The weighted average remaining contractual term of options exercisable was 3.0 years as of December 31, 2013.

The total intrinsic value of options exercised was $2.3 million, $1.2 million, and $147,000, in the years ended December 31, 2013, 2012 and 2011, respectively.

During the years ended December 31, 2013, 2012 and 2011, the amount of cash received from the exercise of stock options was $159,000, $831,000, and $230,000 and total consideration was $6.4 million, $981,000, and $309,000, respectively.

As of December 31, 2013, there was $640,000 of total unrecognized compensation cost related to nonvested stock options which is expected to be recognized over a weighted-average period of 0.6 years.

Restricted Shares

The Company grants restricted stock periodically for the benefit of employees and directors. Restricted shares issued prior to 2011 generally vest on an annual basis over five years. Restricted shares issued since 2011 generally vest over a three years period, subject to time or time plus performance vesting conditions. The following table summarizes information about nonvested restricted share activity at December 31, 2013:

(shares in thousands)



	2013				2012				2011
			Weighted				Weighted				Weighted
	Restricted		Average Grant		Restricted		Average Grant		Restricted		Average Grant
	Shares Outstanding		Date Fair Value		Shares Outstanding		Date Fair Value		Shares Outstanding		Date Fair Value
Balance, beginning of period	763		$	12.39	585		$	12.98	401		$	15.29
Granted	467		$	13.04	369		$	11.80	282		$	11.02
Released	(153	)	$	12.17	(147	)	$	13.50	(82	)	$	17.58
Forfeited/expired	(85	)	$	11.74	(44	)	$	11.52	(16	)	$	12.91
Balance, end of period	992		$	12.79	763		$	12.39	585		$	12.98

The compensation cost related to restricted stock awards that has been charged against income (included in salaries and employee benefits) was $3.7 million, $2.7 million, and $2.3 million for the years ended December 31, 2013, 2012 and 2011, respectively.

The total income tax benefit recognized in the income statement related to restricted stock awards was $1.5 million, $1.1 million, and $899,000 for the years ended December 31, 2013, 2012 and 2011, respectively.

The total fair value of restricted shares vested was $2.0 million, $1.9 million, and $919,000, for the years ended December 31, 2013, 2012 and 2011, respectively.

As of December 31, 2013, there was $6.4 million of total unrecognized compensation cost related to nonvested restricted stock awards which is expected to be recognized over a weighted-average period of 1.4 years.

Restricted Stock Units

The Company granted restricted stock units as a part of the 2007 Long Term Incentive Plan for the benefit of certain executive officers. Restricted stock unit grants are subject to performance-based vesting as well as other approved vesting conditions. The total number of restricted stock units granted represents the maximum number of restricted stock units eligible to vest based upon the performance and service conditions set forth in the grant agreements.

The following table summarizes information about nonvested restricted shares outstanding at December 31:

(shares in thousands)



	2013				2012				2011
			Weighted				Weighted				Weighted
	Restricted		Average		Restricted		Average		Restricted		Average
	Stock Units		Grant Date		Stock Units		Grant Date		Stock Units		Grant Date
	Outstanding		Fair Value		Outstanding		Fair Value		Outstanding		Fair Value
Balance, beginning of period	130		$	10.41	219		$	9.17	225		$	11.13
Granted	—		$	—	25		$	10.39	105		$	10.42
Released	—		$	—	—		$	—	(63	)	$	14.33
Forfeited/expired	(35	)	$	10.42	(114	)	$	8.01	(48	)	$	14.33
Balance, end of period	95		$	10.41	130		$	10.41	219		$	9.17

The compensation cost related to restricted stock units that has been charged against income (included in salaries and employee benefits) was $144,000, $237,000, and $391,000 for the years ended December 31, 2013, 2012 and 2011, respectively.

The total income tax benefit recognized in the income statement related to restricted stock units was $58,000, $95,000 and $156,000 for the years ended December 31, 2013, 2012 and 2011, respectively.

The total fair value of restricted stock units vested and released was none for the years ended December 31, 2013 and 2012 and $677,000 for the year ended December 31, 2011.

As of December 31, 2013, there was $105,000 of total unrecognized compensation cost related to nonvested restricted stock units which is expected to be recognized over a weighted-average period of 0.4 years, assuming the current expectation of performance conditions are met.

For the years ended December 31, 2013, 2012 and 2011, the Company received income tax benefits of $1.7 million, $1.2 million, and $694,000, respectively, related to the exercise of non-qualified employee stock options, disqualifying dispositions in the exercise of incentive stock options, the vesting of restricted shares and the vesting of restricted stock units.

For the years ended December 31, 2013, 2012 and 2011, the Company had a net tax benefit of $148,000 and net tax deficiencies (tax deficiency resulting from tax deductions less than the compensation cost recognized) of $59,000 and $261,000, respectively. Only cash flows from gross excess tax benefits are classified as financing cash flows.

Share Repurchase Plan- The Company’s share repurchase plan, which was first approved by the Board and announced in August 2003, was amended on September 29, 2011 to increase the number of common shares available for repurchase under the plan to 15 million shares. In April 2013, the repurchase program was extended to run through June 2015. As of December 31, 2013, a total of 12.0 million shares remained available for repurchase. The Company repurchased 98,027 shares under the repurchase plan in 2013, 512,280 shares under the repurchase plan in 2012 and 2.5 million shares in 2011. The timing and amount of future repurchases will depend upon the market price for our common stock, securities laws restricting repurchases, asset growth, earnings, and our capital plan.

We also have certain stock option and restricted stock plans which provide for the payment of the option exercise price or withholding taxes by tendering previously owned or recently vested shares. During the years ended December 31, 2013 and 2012, there were 438,000 and 38,000 shares tendered in connection with option exercises, respectively. Restricted shares cancelled to pay withholding taxes totaled 49,000 and 46,000 shares during the years ended December 31, 2013 and 2012, respectively. There were no restricted stock units cancelled to pay withholding taxes for the years ended December 31, 2013 and 2012.