15. STOCK-BASED COMPENSATION

Our Stock Incentive Plans provide for the granting of stock options, stock appreciation rights, performance awards, restricted stock and restricted stock unit awards, deferred stock units, and other awards that are payable in or valued by reference to our common shares. The number of shares reserved for issuance under our 2013 Incentive Plan (2013 Plan) is 2,096,535. At December 31, 2016, there were 639,410 shares available for future grants under the 2013 Plan. Generally, all awards become exercisable immediately in the event of a change in control, as defined within the Stock Incentive Plans.

Total stock-based compensation expense recognized was $3.0 million ($2.0 million after tax) for 2016, $3.2 million ($2.2 million after tax) for 2015, and $3.7 million ($2.6 million after tax) for 2014. Stock-based compensation expense related to awards granted to Associates is recorded in Salaries, benefits and other compensation; expense related to awards granted to directors is recorded in Other operating expense in our Consolidated Statements of Operations.

Stock Options

Stock options are granted with an exercise price not less than the fair market value of our common stock on the date of the grant. With the exception of certain Non-Plan Stock Options (as defined below), all stock options granted during 2016, 2015, and 2014 vest in 25% per annum increments, start to become exercisable one year from the grant date and expire between five and seven years from the grant date. We issue new shares upon the exercise of options.

We determine the grant date fair value of stock options using the Black-Scholes option-pricing model. The model requires the use of numerous assumptions, many of which are subjective. Beginning in 2016, the expected term was derived from historical exercise patterns and represents the amount of time that stock options granted are expected to be outstanding. Other significant assumptions to determine 2016, 2015, and 2014 grant date fair value included volatility measured using the fluctuation in month end closing stock prices over a period which corresponds with the average expected option life; a weighted-average risk-free rate of return (zero coupon treasury yield); and a dividend yield indicative of our current dividend rate. The assumptions for options issued during 2016, 2015, and 2014 are presented below:


	2016			2015			2014
Expected term (in years)		5.3			4.9			4.9
Volatility		29.6	%		25.0	%		29.0	%
Weighted-average risk-free interest rate		1.25	%		1.54	%		0.97	%
Dividend yield		0.80	%		0.76	%		0.67	%

On April 25, 2013 stockholders approved a change in future compensation for Mark A. Turner, President and CEO. As a result, Mr. Turner was granted 750,000 non-statutory stock options (“Non-Plan Stock Options’) with a longer and slower vesting schedule than our standard options, 40% vesting after the second year and 20% vesting in each of the following three years. Additionally, these options were awarded at an exercise price of 20% over the December 2012 market value (the date on which framework of the plan was decided). Upon the grant, Mr. Turner is no longer eligible to receive grants under any of our other stock based award programs for a period of five years. The Black-Scholes option-pricing model was used to determine the grant date fair value of the options. Significant assumptions used in the model included a weighted-average risk-free rate of return (zero coupon treasury yield) of 0.76%; an expected option life of five years; an expected stock price volatility of 40.5%; and a dividend yield of 1.01%.

Additionally, in 2013, 450,000 incentive stock options were issued to certain executive officers of the Company under the 2013 Plan. These options have the same vesting schedule and exercise price as the Non-Plan Stock Options granted to Mr. Turner. The Black-Scholes option-pricing model with the same assumptions as the Non-Plan Stock Options was used to determine the grant date fair value of the options.

A summary of the status of our options (including Non-Plan Stock Options) as of December 31, 2016, and changes during the year, is presented below:

2016

Shares

Weighted-
Average
Exercise
Price

Weighted-
Average
Remaining
Contractual
Term
(Year)

Aggregate
Intrinsic
Value (In
Thousands)

Stock Options:

Outstanding at beginning of year

1,647,878

17.08

3.74

25,175

Granted

155,978

22.40

Exercised

(250,939

)

15.84

Forfeited

(4,937

)

14.85

Outstanding at end of year

1,547,980

17.83

3.17

44,153

Nonvested at end of year

704,421

19.08

5.23

19,212

Exercisable at end of year

843,899

16.78

2.90

24,950

The weighted-average fair value of options granted was $7.84 in 2016, $5.73 in 2015 and $5.78 in 2014. The aggregate intrinsic value of options exercised was $5.0 million in 2016, $3.0 million in 2015, and $2.4 million in 2014.

The following table provides information about our nonvested stock options outstanding at December 31, 2016:

2016

Shares

Weighted-
Average
Exercise
Price

Weighted-
Average
Grant Date
Fair Value

Stock Options:

Nonvested at beginning of period

1,028,142

17.58

4.85

Granted

155,978

22.40

7.84

Vested

(477,675

)

16.95

3.60

Forfeited

(2,024

)

15.21

4.70

Nonvested at end of period

704,421

19.08

5.23

The total amount of unrecognized compensation cost related to nonvested stock options as of December 31, 2016 was $2.1 million. The weighted-average period over which the expense is expected to be recognized is 1.5 years. During 2016, we recognized $1.7 million of compensation expense related to these awards.

Restricted Stock and Restricted Stock Units

Restricted stock awards (RSAs) and restricted stock units (RSUs) are granted at no cost to the recipient and generally vest over a four year period. All outstanding awards granted to senior executives vest over no less than a four year period. The 2013 Plan allows for awards with vesting periods less than four years subject to Board approval. RSA recipients are entitled to voting rights and generally entitled to dividends on the common stock during the vesting period. The fair value of RSAs and RSUs is equal to the fair value of the Company’s common stock on the date of grant.

We recognize the expense related to RSAs and RSUs granted to Associates into salaries, benefits and other compensation expense and granted to directors into other operating expense on an accrual basis over the requisite service period for the entire award. When we award restricted stock to individuals from whom we may not receive services in the future, we recognize the expense of restricted stock grants when we make the award, instead of amortizing the expense over the vesting period of the award.

Effective January 3, 2011, the Board approved a plan in which Marvin N. Schoenhals, Chairman of the Board, was granted 66,750 RSA’s with a five-year performance vesting schedule starting at the end of the second year following the grant date. These RSAs are subject to vesting in whole or in part based on the role that Mr. Schoenhals plays in establishing new business over a two year period of time that achieves over a two year period a result of at least a 50% return on investment of the cost of the restricted stock. We recognized compensation expense of $0.1 million related to this award in 2016.

The Long-Term Performance-Based Restricted Stock Unit program (Long-Term Program) provided for awards up to an aggregate of 233,400 RSUs to participants, only after the achievement of targeted levels of return on assets (ROA) in any year through 2013. During 2013, the Company achieved the 1.00% ROA performance level. In accordance with the Long-Term Program, the Company issued 108,456 RSUs to the plan’s participants in 2014. The RSUs vest in 25% increments over four years and we recognize expense over the implicit service period associated with the performance condition. During 2016, we recognized $0.4 million of compensation expense related to this program.

The weighted-average fair value of RSUs and RSAs granted was $29.94 in 2016, $26.13 in 2015, and $23.72 in 2014. The total amount of compensation cost to be recognized relating to nonvested restricted stock, including performance awards, as of December 31, 2016, was $1.7 million. The weighted-average period over which the cost is expected to be recognized is 2.7 years. During 2016, we recognized $0.8 million of compensation cost related to these awards.

The following table summarizes the Company’s RSAs and RSUs, including performance awards, and changes during the year:


	Units (in whole)			Weighted Average Grant-Date Fair Value per Unit
Balance at December 31, 2015		171,834		$	12.60
Granted		46,099			29.94
Vested		(80,443	)		17.48
Forfeited		(1,898	)		26.73

Balance at December 31, 2016		135,592		$	25.33

The total fair value of RSUs and RSAs that vested was $1.4 million in 2016, $1.3 million in 2015, and $1.2 million in 2014.