STOCK COMPENSATION PLANS

3 Months Ended

Mar. 31, 2014

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 March 31, 2014, the 2003 Plan authorized grants of stock-based compensation instruments to purchase or issue up to 9,000,000 shares of authorized but unissued Company common stock, subject to adjustments provided by the 2003 Plan. As of March 31, 2014, there were 3,927,147 shares available for grant under the 2003 Plan. Upon consummation of the CapitalSource merger an additional 10,686,565 shares were added to the 2003 Plan. See Note 18, Subsequent Events, for information regarding the issuance of stock in connection with the CapitalSource merger, which was completed on April 7, 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 recorded in December 2013 would have been incurred at that time.

        In April 2014, upon closing of the CapitalSource merger, 1,013,377 awarded shares of both time-based and performance-based common stock vested due to the triggering of the change of control provision contained within the 2003 Plan. We recorded a $16.8 million after-tax charge to earnings for the vesting of such shares in April 2014.

• Restricted Stock

        At March 31, 2014, there were outstanding 479,986 shares of unvested time-based restricted common stock and 607,450 shares of unvested performance-based restricted common stock. All but 40,000 awarded shares of time-based restricted common stock that were issued prior to the closing of the CapitalSource merger vested upon the closing of the CapitalSource merger. The remaining awarded shares of time-based restricted common stock vest over a service period of four years from the date of the grant. Unless defined otherwise in the award, 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.

        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, excluding the accelerated vesting of restricted stock, totaled $1.6 million, $2.3 million, and $1.8 million for the three months ended March 31, 2014, December 31, 2013, and March 31, 2013, respectively. Such amounts are included in "Compensation expense" on the accompanying condensed consolidated statements of earnings. As of March 31, 2014, total unrecognized compensation cost related to unvested restricted stock was $27.4 million. At April 30, 2014, total unrecognized compensation cost related to unvested time-based restricted stock was $1.2 million.