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 common shares available under the 2006 Equity Plan is 1,081,260. The maximum number of common shares that can be issued for incentive stock options is 800,000 common 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. In 2007 and 2008, Peoples granted stock appreciation rights (“SARs”) to be settled in common shares. Since February 2007, Peoples has granted restricted common shares to employees and non-employee directors subject to the terms and conditions prescribed by the 2006 Equity Plan. In general, common shares issued in connection with stock-based awards are issued from treasury shares to the extent available. If no treasury shares are available, common shares are issued from authorized but unissued common 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 common 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' outstanding stock options for the year ended December 31, 2015:



	Number of Common Shares Subject to Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at January 1	38,577	$	28.09
Expired	18,267	27.27
Outstanding at December 31	20,310	$	28.83	0.3 years	$	—
Exercisable at December 31	20,310	$	28.83	0.3 years	$	—

The following table summarizes Peoples’ stock options outstanding at December 31, 2015:



			Options Outstanding & Exercisable
Range of Exercise Prices			Common Shares Subject to Options Outstanding	Weighted-Average Remaining Contractual Life	Weighted-Average Exercise Price
$28.25			10,310	0.1 years	28.25
$28.57	to	$30.00	10,000	0.4 years	29.43
Total			20,310	0.3 years	$	28.83

Stock Appreciation Rights

SARs granted to employees have an exercise price equal to the fair market value of Peoples’ common shares on the date of grant and will be settled using common shares of Peoples. Additionally, the SARs granted to employees vested three years after the grant date and are to expire ten years from the date of grant. The most recent grant of SARs occurred in 2008.

The following summarizes the changes to Peoples' outstanding SARs for the year ended December 31, 2015:



	Number of Common 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	3,544	26.47
Outstanding at December 31	17,748	$	25.86	1.5 years	$	—
Exercisable at December 31	17,748	$	25.86	1.5 years	$	—

The following table summarizes Peoples’ SARs outstanding at December 31, 2015:



Exercise Price	Number of Common Shares Subject to SARs Outstanding & Exercisable	Weighted- Average Remaining Contractual Life
$23.26	2,000	1.6 years
$23.77	8,782	1.9 years
$29.25	6,966	1.0 year
Total	17,748	1.5 years

Restricted Shares

Under the 2006 Equity Plan, Peoples may award restricted common shares to officers, key employees and non-employee directors. In general, the restrictions on common shares awarded to non-employee directors expire after six months, while the restrictions on common shares awarded to employees expire after periods ranging from one to three years. In 2015, Peoples granted an aggregate of 108,411 restricted common shares subject to performance-based vesting to officers and key employees with restrictions that will lapse three years after the grant date provided that in order for the restricted common shares to vest in full, Peoples must have reported positive net income and maintained a well capitalized status by regulatory standards for each of the three fiscal years preceding the vesting date. Peoples also granted an aggregate of 5,600 restricted common shares to non-employee directors with a six-month time-based vesting period. In addition, Peoples granted restricted common shares during 2015 to attract and/or retain key employees with vesting periods ranging from one to three years.

The following summarizes the changes to Peoples’ outstanding restricted common shares for the year ended December 31, 2015:



	Time Vesting			Performance Vesting
	Number of Common Shares	Weighted-Average Grant Date Fair Value		Number of Common Shares	Weighted-Average Grant Date Fair Value
Outstanding at January 1	47,591	$	19.48	125,079	$	21.73
Awarded	22,600	21.13		108,411	23.62
Released	36,907	18.21		49,058	21.74
Forfeited	2,550	24.94		25,669	22.70
Outstanding at December 31	30,734	$	21.76	158,763	$	22.86

The total intrinsic value of restricted common shares released was $2.0 million, $1.6 million and $654,000 in 2015, 2014 and 2013, respectively.

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 at December 31:



(Dollars in thousands)	2015			2014			2013
Total stock-based compensation	$	1,843		$	2,111		$	1,362
Recognized tax benefit	(645		)	(739		)	(477		)
Net expense recognized	$	1,198		$	1,372		$	885

Restricted common shares were the only stock-based compensation awards granted by Peoples in 2015, 2014 and 2013. The fair value of restricted common share awards on the grant date is the market price of Peoples' common shares. Total unrecognized stock-based compensation expense related to unvested awards was $2.0 million at December 31, 2015, which will be recognized over a weighted-average period of 1.9 years. In 2014, the Board of Directors granted 12,030 unrestricted common shares to certain employees that did not already participate in the 2006 Equity Plan, which resulted in an additional $298,000 of stock-based compensation expense being recognized.