Stock-Based Compensation

Under the Peoples Bancorp Inc. Second Amended and Restated 2006 Equity Plan (the “2006 Equity Plan”), Peoples may grant, among other awards, nonqualified stock options, incentive stock options, restricted stock awards, stock appreciation rights and unrestricted share awards to employees and non-employee directors. The total number of shares available under the 2006 Equity Plan is 1,081,260. The maximum number of shares that can be issued for incentive stock options is 800,000 shares. Prior to 2007, Peoples granted nonqualified and incentive stock options to employees and nonqualified stock options to non-employee directors under the 2006 Equity Plan and predecessor plans. Since February 2007, Peoples has granted a combination of restricted shares and stock appreciation rights (“SARs”) to be settled in shares to employees and restricted shares to non-employee directors subject to the terms and conditions prescribed by the 2006 Equity Plan. In general, shares issued in connection with stock-based awards are issued from treasury shares to the extent available. If no treasury shares are available, shares are issued from authorized but unissued shares.

Stock Options

Under the provisions of the 2006 Equity Plan and predecessor stock option plans, the exercise price per share of any stock option granted may not be less than the grant date fair market value of the underlying shares. All stock options granted to both employees and non-employee directors expire ten years from the date of grant. The most recent stock option grants to employees and non-employee directors occurred in 2006. The stock options granted to employees vested three years after the grant date, while the stock options granted to non-employee directors vested six months after the grant date.

The following summarizes the changes to Peoples' stock options for the period ended March 31, 2014:



	Number of Shares Subject to Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at January 1	57,094	$	27.96
Expired	7,728	28.52
Outstanding at March 31	49,366	$	27.87	1.4 years	$	1,000
Exercisable at March 31	49,366	$	27.87	1.4 years	$	1,000

The following table summarizes Peoples’ stock options outstanding at March 31, 2014:



			Options Outstanding & Exercisable
Range of Exercise Prices			Shares Subject to Options Outstanding & Exercisable	Weighted-Average Remaining Contractual Life	Weighted-Average Exercise Price
$23.59	to	$25.94	2,792	0.4 years	$	25.41
$26.01	to	$27.74	20,334	0.7 years	27.08
$28.25	to	$28.26	15,040	1.9 years	28.25
$28.57	to	$30.00	11,200	2.2 years	29.40
Total			49,366	1.4 years	$	27.87

Stock Appreciation Rights

SARs granted to employees have an exercise price equal to the fair market value of Peoples’ shares on the date of grant and will be settled using shares of Peoples. Additionally, the SARs granted vested three years after the grant date and expire ten years from the date of grant. The most recent grant of SARs occurred in 2008. The following summarizes the changes to Peoples' SARs for the period ended March 31, 2014:



	Number of Shares Subject to SARs	Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at January 1	21,292	$	25.96
Forfeited	—	—
Outstanding at March 31	21,292	$	25.96	3.4 years	$	13,000
Exercisable at March 31	21,292	$	25.96	3.4 years	$	13,000

The following table summarizes Peoples’ SARs outstanding at March 31, 2014:



Exercise Price	Number of Shares Subject to SARs Outstanding & Exercisable	Weighted- Average Remaining Contractual Life
$23.26	2,000	3.3 years
$23.77	10,582	3.9 years
$29.25	8,710	2.9 years
Total	21,292	3.4 years

Restricted Shares

Under the 2006 Equity Plan, Peoples may award restricted shares to officers, key employees and non-employee directors. In general, the restrictions on shares awarded to non-employee directors expire after six months, while the restrictions on shares awarded to employees expire after periods ranging from one to three years. In the first quarter of 2014, Peoples granted restricted shares subject to performance-based vesting to officers and key employees with restrictions that will lapse one to three years after the grant date provided that Peoples has net income greater than zero and maintains a well-capitalized status by regulatory standards.

The following summarizes the changes to Peoples’ restricted shares for the period ended March 31, 2014:



	Time-Based Vesting			Performance-Based Vesting
	Number of Shares	Weighted-Average Grant Date Fair Value		Number of Shares	Weighted-Average Grant Date Fair Value
Outstanding at January 1	60,206	$	17.18	85,254	$	20.98
Awarded	2,000	22.79		83,514	21.68
Released	10,994	16.93		37,746	19.93
Forfeited	—	—		100	21.68
Outstanding at March 31	51,212	$	17.46	130,922	$	21.73

For the three months ended March 31, 2014, the total intrinsic value of restricted shares released was $1,064,000.

Stock-Based Compensation

Peoples recognized stock-based compensation expense, which is included as a component of Peoples’ salaries and employee benefit costs, based on the estimated fair value of the awards on the grant date. The following summarizes the amount of stock-based compensation expense and related tax benefit recognized:



	Three Months Ended
	March 31,
(Dollars in thousands)	2014			2013
Total stock-based compensation	$	490		$	297
Recognized tax benefit	(172		)	(104		)
Net expense recognized	$	318		$	193

Total unrecognized stock-based compensation expense related to unvested awards was $2.0 million at March 31, 2014, which will be recognized over a weighted-average period of 1.7 years.