Stock-based Compensation and Benefits

The Company provides stock-based compensation in accordance with shareholder-approved plans. During the second quarter of 2014, shareholders approved the 2014 Omnibus Incentive Plan (the "2014 Plan"). The 2014 Plan replaces the NBH Holdings Corp. 2009 Equity Incentive Plan (the "Prior Plan"), pursuant to which the Company granted equity awards prior to the approval of the 2014 Plan. Pursuant to the 2014 Plan, the compensation committee of the board of directors has the authority to grant, from time to time, awards of options, stock appreciation rights, restricted stock, restricted stock units, performance units, other stock-based awards, or any combination thereof to eligible persons.

The aggregate number of Class A common stock available for issuance under the 2014 Plan is 5,129,670 shares. Any shares that are subject to stock options or stock appreciation rights under the 2014 Plan will be counted against the amount available for issuance as one share for every one share granted, and any shares that are subject to awards under the 2014 Plan other than stock options or stock appreciation rights will be counted against the amount available for issuance as 3.25 shares for every one share granted. The 2014 Plan provides for recycling of shares from both the Prior Plan and the 2014 Plan, the terms of which are further described in the Company's Proxy Statement for its 2014 Annual Meeting of Shareholders.

To date, the Company has issued stock options and restricted stock under the plans. The compensation committee sets the option exercise price at the time of grant, but in no case is the exercise price less than the fair market value of a share of stock at the date of grant.

The Company issued stock options and restricted stock during 2014, 2013, and 2012. The expense associated with the awarded stock options was measured at fair value using a Black-Scholes option-pricing model. Restricted stock with time-based vesting was valued at the fair value of the shares on the date of grant since they are assumed to be held beyond the vesting period. Restricted stock awards with market vesting components (granted in 2012) were valued using a Monte Carlo Simulation with 100,000 simulation paths to assess the expected percentage of vested shares. A Geometric Brownian Motion was used for simulating the equity prices for a period of 10 years and if the restricted stock were not vested during the 10-year period, it was assumed they were forfeited.

The option awards vest on a graded basis over 1-4 years of continuous service and have 7-10 year contractual terms. Below are the weighted average assumptions used in the Black-Scholes option pricing model to determine fair value of the Company’s stock options granted in 2014:



	Black-Scholes
Risk-free interest rate	2.02	%
Expected volatility	33.94	%
Expected term (years)	6.01
Dividend yield	1.06	%

Prior to September 20, 2012, the Company’s shares were not publicly traded and had limited private trading. As a private entity, volatility was estimated using the calculated value method, whereby the expected volatility was calculated based on the median historical volatility of 17 comparable companies that were publicly traded, for a period commensurate with the expected term of the options. Upon becoming a publicly traded entity, the Company was subject to a change in accounting policy under the provisions of ASC Topic 718 Compensation-Stock Compensation, whereby expected volatility of grants, modifications, repurchases or cancellations that occur subsequent to the Company becoming a publicly traded entity were calculated using a time-based weighted migration of the Company’s own stock price volatility coupled with those of the peer group. The weighting will become increasingly dependent on the Company’s own stock-price volatility as time passes, until such time that the Company’s stock has a historical volatility equal in length to that of the expected term of the awards being measured. For awards granted after the Company became a publicly traded entity, expected volatility was calculated using a time-based weighted migration of the Company’s own stock price volatility coupled with those of a peer group of eight comparable publicly traded companies for a period commensurate with the expected term of the options. The risk-free rate for the expected term of the options was based on the U.S. Treasury yield curve at the date of grant and based on the expected term. The expected term was estimated to be the average of the contractual vesting term and time to expiration. The dividend yield was assumed to be zero for grants made prior to the initial public offering and for subsequent grants was assumed to be $0.05 per share per quarter in accordance with the Company’s dividend policy at the time of grant.

During 2014, the Company granted 114,668 options. The options are time-vesting with 1/3 vesting on each of the first, second, and third anniversary of the date of grant or date of hire.

The Company issued stock options and restricted stock in accordance with the plans during 2014. The following table summarizes stock option activity for 2014:



	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term in Years	Aggregate Intrinsic Value
Outstanding at December 31, 2013	3,515,486		$	19.92	6.13	$	5,183,567
Granted	114,668		18.93
Forfeited	(19,460	)	18.15
Surrendered	(9,705	)	20.00
Exercised	(295	)	20.00
Expired	(3,583	)	20.00
Outstanding at December 31, 2014	3,597,111		$	19.90	4.46	$	223,211
Options fully vested and exercisable at December 31, 2014	3,254,331		$	19.99	4.04	$	—
Options expected to vest	331,176		$	19.09	8.18	$	191,914

Options granted during 2014, 2013, and 2012 had weighted average grant date fair values of $6.08, $5.56, and $8.43. The following table summarizes information about the Company's outstanding stock options at December 31, 2014:



Options outstanding						Options vested
Exercise price		Number outstanding	Weighted average remaining contractual life (years)	Weighted average exercise price		Number vested	Weighted average exercise price
$	18.09	101,700	8.25	$	18.09	—	$	—
$	18.23	30,000	7.55	$	18.23	15,000	$	18.23
$	18.92	109,300	9.42	$	18.92	—	$	—
$	19.39	520	9.85	$	19.39	—	$	—
$	19.56	1,168	9.36	$	19.56	—	$	—
$	20.00	3,325,222	4.11	$	20.00	3,239,331	$	20.00
$	20.48	2,801	8.85	$	20.48	—	$	—
$	20.54	26,400	8.60	$	20.54	—	$	—

Stock option expense is included in salaries and benefits in the accompanying consolidated statements of operations and totaled $1.2 million, $2.2 million, and $6.7 million for 2014, 2013, and 2012, respectively. At December 31, 2014, there was $0.8 million of total unrecognized compensation cost related to non-vested stock options granted under the plans. The cost is expected to be recognized over a weighted average period of 0.6 years.

Expense related to non-vested restricted stock totaled $2.3 million, $2.7 million, and $6.3 million during 2014, 2013, and 2012, respectively, and is included in salaries and benefits in the Company’s consolidated statements of operations. As of December 31, 2014, there was $2.0 million of total unrecognized compensation cost related to non-vested restricted shares granted under the plans, which is expected to be recognized over a weighted average period of 0.9 years. The following table summarizes restricted stock activity for 2014:



	Total Restricted Shares		Weighted Average Grant-Date Fair Value
Unvested at December 31, 2013	1,064,460		$	15.16
Vested	(42,880	)	19.32
Granted	147,606		18.98
Forfeited	(184,790	)	19.49
Surrendered	(28,998	)	19.08
Unvested at December 31, 2014	955,398		$	14.61