15.	Stock Based Compensation

We account for share-based awards in accordance with ASC

718,

which requires the fair value of stock-based compensation awards to be amortized as an expense over the vesting period. Stock-based compensation awards are valued at fair value on the date of grant. The following table sets forth share-based award expense activity for the

three

months ended

March

31,

2017

and

2016:

	Three Months Ended
	March 31,
	2017		2016
	(Dollars in thousands)
Stock option grant expense	$	276	$	2,650
Restricted stock awards expense		319		337
Total stock based compensation	$	595	$	2,987

May

18,

2015,

the Company granted a non-qualified stock option to each of the Chief Executive Officer and the Chief Operating Officer for

1,050,000

shares of common stock under the Company’s

2011

Equity Incentive Plan. The terms of each option provide that, over a

five

year period,

one

third

of the option shares will vest as of each of the

third,

fourth,

and

fifth

anniversary dates of the grant of the option; provided that all unvested option shares will vest immediately in the event the closing price of the Company’s stock, as reported by the New York Stock Exchange, in any

out of

consecutive trading days closes at a price equal to or greater than

120%

of the closing price on the date of grant (the “market-based condition”). The option exercise price is equal to the closing price of the Company’s common stock on the date of grant, which was

$27.10

and the expiration date of each option is

May

18,

2025.

In accordance with ASC

718,

the market-based awards were assigned a fair value of

$5.35

per share (total value of

$11.2

million) on the date of grant using a Monte Carlo simulation model and, as calculated under that model, all expense was recorded on a straight-line basis through the end of the

2016

second

quarter. Included in the stock-based compensation expense for the

three

months ended

March

31,

2017

and

2016,

shown in the table above, was

and

$2.5

million, respectively, of stock option grant expense related to these market-based option grants.

July

25,

2016,

the Company granted long term performance stock unit awards (“PSUs”) to each of the Chief Executive Officer, the Chief Operating Officer, and the Chief Financial Officer under the Company’s

2011

Equity Incentive Plan. The PSUs will be earned based upon the Company’s performance, over a

three

year period commencing

July

2016

and ending

June

30,

2019

(the “Performance Period”), measured by increasing home sale revenues over the Base Period. The “Base Period” for the awards is

July

2015

June

30,

2016.

The awards are conditioned upon the Company achieving an average gross margin from home sales percentage (excluding impairments) of at least

fifteen

percent

(15%)

over the Performance Period. Target goals of

105,000

shares for each of the Chief Executive Officer and the Chief Operating Officer and

26,250

shares for the Chief Financial Officer (the “Target Goals”) will be earned if the Company’s

three

year average home sale revenues over the Performance Period (“Performance Revenues”) exceed the

$1.975

billion in home sale revenues over the Base Period (“Base Revenues”) by at least

10%

but less than

20%.

If Performance Revenues exceed the Base Revenues by at least

but less than

10%,

50%

of the Target Goals will be earned. If Performance Revenues exceed the Base Revenues by at least

20%,

200%

of the Target Goals will be earned.

In accordance with ASC

718,

the PSUs were valued at the fair value on the date of grant. The grant date fair value of these awards was

$22.93

per share and the maximum potential expense that would be recognized by the Company if the maximum of the performance targets were met would be approximately

$10.8

million. ASC

718

does not permit recognition of expense associated with performance based stock awards until achievement of the performance targets are probable of occurring. As of

March

31,

2017,

the Company concluded that achievement of any of the performance targets had not met the level of probability required to record compensation expense at that time and, as such,

compensation expense was recognized related to the grant of these awards during the

2017

first

quarter.