STOCK COMPENSATION PLANS

9 Months Ended

Sep. 30, 2013

STOCK COMPENSATION PLANS

STOCK COMPENSATION PLANS

NOTE 13—STOCK COMPENSATION PLANS

        The Company's 2003 Stock Incentive Plan, or the 2003 Plan, permits stock based compensation awards to officers, directors, key employees and consultants. As of September 30, 2013, the 2003 Plan authorized grants of stock-based compensation instruments to purchase or issue up to 6,500,000 shares of authorized but unissued Company common stock, subject to adjustments provided by the 2003 Plan. As of September 30, 2013, there were 1,431,481 shares available for grant under the 2003 Plan.

• Restricted Stock

        At September 30, 2013, there were outstanding 916,462 shares of unvested time-based restricted common stock and 875,000 shares of unvested performance-based restricted common stock. The awarded shares of time-based restricted common stock vest over a service period of three to four years from the date of the grant. The awarded shares of performance-based restricted common stock vest in full on the date the Compensation, Nominating and Governance, or CNG, Committee of the Board of Directors, as Administrator of the 2003 Plan, determines that the Company achieved certain financial goals established by the CNG Committee as set forth in the grant documents. Both time-based and performance-based restricted common stock vest immediately upon a change in control of the Company as defined in the 2003 Plan and upon death of the employee.

        Compensation expense related to time-based restricted stock awards is based on the fair value of the underlying stock on the award date and is recognized over the vesting period using the straight-line method. Restricted stock amortization totaled $2.4 million, $2.0 million, and $1.4 million for the three months ended September 30, 2013, June 30, 2013, and September 30, 2012, respectively, and $6.1 million and $4.3 million for the nine months ended September 30, 2013 and 2012, respectively. Such amounts are included in compensation expense on the accompanying condensed consolidated statements of earnings.

        We are currently not recognizing any compensation expense for 575,000 of the 875,000 shares of performance-based restricted stock as management has concluded that it is improbable that the respective financial targets related to these outstanding stock awards will be met. If and when the attainment of such financial targets is deemed probable in future periods, a catch-up adjustment will be recorded and amortization of such performance-based restricted stock will begin again. The total amount of unrecognized compensation expense related to performance-based restricted stock for which amortization is not being recognized totaled $19.0 million at September 30, 2013. The amount of unrecognized compensation expense related to all unvested restricted stock as of September 30, 2013 totals $41.7 million.

        As noted above, both time-based and performance-based restricted stock vests upon a change in control of the Company. The CapitalSource, Inc. merger, expected to close in the first quarter of 2014, will trigger restricted stock vesting under the change in control provisions within the 2003 Plan. The remaining unamortized expense for all the performance-based and time-based awards will be recognized at that time. See also Note 18, Subsequent Events.