NOTE 13. STOCK-BASED COMPENSATION

In May 2005 our shareholders approved the 2005 Stock Incentive Plan authorizing the issuance in aggregate of 1,000,000 incentive stock options, non-incentive stock options, restricted shares and stock appreciation rights for our common stock. In April 2009, the stockholders approved an amendment to the 2005 Stock Incentive Plan increasing the available number of awards from 1,000,000 to 1,500,000. In April 2013, the stockholders further amended and restated the 2005 Stock Incentive Plan increasing the available number of awards from 1,500,000 to 2,000,000 in the Second Amended and Restated 2005 Stock Incentive Plan. The stock split that occurred on January 20, 2017 doubled the number of awards from 2,000,000 to 4,000,000. As of December 31, 2017, 3,156,664 of such awards were issued leaving 843,336 awards available to be issued in subsequent periods.

Stock-based compensation granted under our Company’s stock plans is expensed in tranches over the vesting period. Options and non-performance based grants generally vest equally over a three or four year period and the options had a maximum term of ten years. Our Company’s performance based share grants generally consist of three types of awards. The performance units issued in 2017, 2016 and 2015 will cliff vest on the third anniversary of the date of the grant in an amount as determined by the rate of cumulative annual growth in tangible book value for the three years immediately prior to the vesting date, with actual shares that vest ranging between 150% to 50% of that portion of the original award.

During 2017, 2016 and 2015, the total compensation cost for share-based payment arrangements recognized in the income statement was $13.8 million, $17.6 million and $15.0 million, and the recorded tax benefits related to share-based awards were $2.9 million, $6.2 million and $5.2 million, respectively.

As of December 31, 2017 and 2016, the total unrecognized compensation expense related to nonvested stock awards was $18.0 million and $22.3 million, respectively, which is expected to be recognized as expense over weighted average periods of 1.9 years and 1.8 years, respectively. The aggregate fair value of all unvested restricted stock units as of December 31, 2017 and 2016 was $49.9 million and $87.2 million, respectively. The aggregate fair value did not change after the stock split, as shares were doubled and the price per share halved.

Restricted Stock Units

The activity related to our Company’s restricted stock unit awards was as follows:

	Year Ended December 31, 2017
	Number of Awards			Weighted Average Grant Date Fair Value ⁽¹⁾
Nonvested at the beginning of the year		197,422		$	37.24
Granted		35,297		$	56.05
Vested		(59,930	)	$	36.21
Forfeited		(13,250	)	$	39.41
Nonvested at the end of the year		159,539		$	41.60

(1) Fair value is based on the closing price of our common shares on the NASDAQ on the grant date.

During 2017, 2016 and 2015, we granted 35,297, 84,000 and 64,316 restricted stock units, respectively, with weighted average grant-date fair values per share of $56.05, $44.52 and $38.72, respectively.

During 2017, 2016 and 2015, the total fair value of restricted stock units vested was $3.3 million, $2.5 million and $2.6 million, respectively.

Performance-based Equity Awards

The activity related to our Company’s performance-based equity awards was as follows:

	Year Ended December 31, 2017
	Number of Awards			Weighted Average Grant Date Fair Value ⁽¹⁾
Nonvested at the beginning of the year		1,176,742		$	35.85
Granted		253,333		$	55.70
Performance Adjustment		83,071		$	30.49
Vested		(520,285	)	$	30.38
Forfeited		(26,500	)	$	41.60
Nonvested at the end of the year		966,361		$	43.39

(1) Fair value is based on the closing price of our common shares on the NASDAQ on the grant date.

During 2017, 2016 and 2015, we granted 253,333, 404,946 and 370,100 performance-based equity awards, respectively, with weighted average grant-date fair values per share of $55.70, $40.77 and $37.25, respectively.

During 2017, 2016 and 2015, the total fair value of performance-based equity awards vested was $29.0 million, $11.5 million and $12.5 million, respectively.

Stock Options

During 2017, 2016 and 2015, our Company did not grant any stock options. There are currently no stock options outstanding with the last exercise of stock options occurring during 2015.

Employee Stock Purchase Plan

We offer an Employee Stock Purchase Plan (the “ESPP”) to all of our eligible employees. Employees are offered the opportunity to purchase our Company’s Common stock at 90% of fair market value at the lower of the price at the beginning or the end of each six month offering period. Each employee can invest up to 10% of their base compensation subject to the lesser of 1,000 common stock shares or total market value of $25,000. There were 40,488 shares purchased in 2017 from funds withheld during the July 1, 2016 to December 31, 2016 and January 1, 2017 to June 30, 2017 offering periods. There were 41,224 shares purchased in 2016 in the aggregate from funds withheld during the offering periods of July 1, 2015 to December 31, 2015 and January 1, 2016 to June 30, 2016. We expense both the value of the 10% discount and the “look-back” option, which provides for the more favorable price at either the beginning or end of the offering period.