NOTE 17—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 December 31, 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. In May 2013, the Board of Directors approved the equity award of 12,742 common shares to non-employee directors of the Company. Such shares were granted outright and vested immediately with a charge to other noninterest expense of $361,000 at that time. As of December 31, 2013, there were 1,433,647 shares available for grant under the 2003 Plan. At the Special Meeting of Stockholders held on January 13, 2014, our stockholders approved an amendment to the 2003 Plan to increase the aggregate number of shares of Company common stock authorized for grant from 6.5 million shares to 9.0 million shares. As a result of this action, 3,927,147 shares were available for grant as of February 28, 2014.

Accelerated Vesting of Restricted Stock

In December 2013, the Company accelerated the vesting of certain restricted stock awards that resulted in a pre-tax charge of $12.4 million ($12.2 million after tax). This action was taken by the Company in order to eliminate an additional $21.0 million of compensation and tax expense related to change in control payments that the Company would have otherwise incurred upon consummation of the CapitalSource merger. Such eliminated expenses relate to tax gross-up payments and the value of lost tax deductions, in each case due to the impact of Sections 280G and 4999 of the Internal Revenue Code as they apply to change in control payments that would have become payable to certain PacWest employees in conjunction with the CapitalSource merger. The restricted stock awards that were vested on an accelerated basis in 2013 would have otherwise vested upon consummation of the CapitalSource merger, and the $12.2 million after-tax charge to earnings that we recorded in December 2013 would have been incurred at that time.

Restricted Stock

The following table presents a summary of restricted stock transactions for the years indicated:

			Weighted Average Grant Date Fair Value (Per Share)

Unvested restricted stock, December 31, 2010	1,230,582		$	35.86
Granted	692,900			20.50
Shares issued by the Company upon vesting	(203,174	)		30.13
Forfeited	(44,578	)		23.56


Unvested restricted stock, December 31, 2011	1,675,730			30.53
Granted	226,400			23.77
Shares issued by the Company upon vesting	(195,871	)		21.69
Forfeited	(7,978	)		22.31


Unvested restricted stock, December 31, 2012	1,698,281			30.68
Granted	673,900			29.06
Shares issued by the Company upon vesting	(819,461	)		24.84
Forfeited	(336,196	)		48.92


Unvested restricted stock, December 31, 2013	1,216,524		$	28.69

At December 31, 2013, there were outstanding 609,074 shares of unvested time-based restricted common stock and 607,450 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 five years from the date of the grant. Of the 607,450 outstanding shares of unvested performance-based restricted stock, 505,944 shares will 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 has achieved certain financial goals established by the CNG Committee as set forth in the grant documents. The remaining 101,506 shares of unvested performance-based restricted stock vest over a period of three years once the performance targets are met. 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 or upon death of the employee. The vesting date fair values of restricted stock awards that vested during 2013, 2012, and 2011 were $30.9 million, $4.5 million, and $3.7 million, respectively.

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 $8.5 million (excluding accelerated vesting of restricted stock of $12.4 million), $5.7 million, and $7.6 million for the years ended December 31, 2013, 2012, and 2011, respectively. Such amounts are included in compensation expense on the accompanying consolidated statements of earnings. The income tax benefit recognized in the consolidated statements of earnings related to this expense was $3.4 million, $2.2 million, and $3.2 million for 2013, 2012, and 2011, respectively. As of December 31, 2013, total unrecognized compensation cost related to unvested time-based restricted stock was $9.2 million. This cost would be recognized over a weighted average period of 1.5 years if the CapitalSource merger is not consummated.

We are currently not recognizing any compensation expense for 505,944 of the 607,450 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 the 505,944 shares of performance-based restricted stock for which amortization is not being recognized totaled $17.5 million at December 31, 2013. We are recognizing amortization and compensation expense for the remaining 101,506 shares of performance-based restricted stock. The total amount of unrecognized compensation expense related to these shares was $2.4 million at December 31, 2013.

As noted above, both time-based and performance-based restricted stock vest upon a change in control of the Company. The closing of the CapitalSource merger will trigger restricted stock vesting under the change in control provisions within the 2003 Plan. The remaining unamortized expense will be recognized at that time for those awards where compensation expense is currently being recognized. The expense to be recognized for those performance-based awards where we are not currently recognizing any compensation expense will be the fair value of those shares on the merger closing date.

The following table summarizes information about outstanding time-based and performance-based restricted stock awards as of the date indicated:

	December 31, 2013

	Number of Shares Outstanding		Weighted Average Grant Date Fair Value (Per Share)		Weighted Average Fair Value⁽¹⁾ (In thousands)		Weighted Average Remaining Contractual Life (Years)
Time-based restricted stock granted in:
2010		56,884	$	19.79	$	2,402		0.2
2011		190,716	$	20.30		8,052		1.4
2012		213,050	$	23.74		8,995		1.3
2013		148,424	$	29.87		6,266		2.3


Outstanding time-based restricted stock awards		609,074				25,715		1.5


Performance-based restricted stock granted in:
2007		205,000	$	54.92		8,655		3.1
2011		291,759	$	20.46		12,318		2.2
2013		110,691	$	28.74		4,673		3.5


Outstanding performance-based restricted stock awards		607,450				25,646		2.8


Total outstanding restricted stock awards		1,216,524			$	51,361		2.1

⁽¹⁾: Determined using the $42.22 closing price of PacWest common stock on December 31, 2013.