NOTE 20 – SHARE-BASED COMPENSATION

The Company has various types of share-based compensation plans. These plans are administered by the Compensation Committee of the Board of Directors, which selects persons eligible to receive awards and determines the number of shares and/or options subject to each award, the terms, conditions and other provisions of the awards. During the years ended December 31, 2014 and 2013, the Company did not have any equity awards that were settled in cash.

Stock option awards

The Company issues stock options under various plans to directors, officers and other key employees. The option exercise price cannot be less than the fair value of the underlying common stock as of the date of the option grant and the maximum option term cannot exceed ten years. The stock options granted were issued with vesting periods ranging from one-and-a half to seven years. At December 31, 2014, future option or restricted stock awards of 1,038,945 shares could be made under approved incentive compensation plans.

The following table represents the compensation expense that is included in non-interest expense and related income tax benefits in the accompanying consolidated statements of comprehensive income related to stock options for the years ended December 31:


(Dollars in thousands, except per share data)	2014		2013		2012
Compensation expense related to stock options	$	2,053	$	2,110	$	1,873
Income tax benefit related to stock options		719		739		656
Impact on basic earnings per share		0.04		0.05		0.04
Impact on diluted earnings per share		0.04		0.05		0.04

Proceeds from the exercise of stock options	$	11,693	$	8,101	$	2,813
Excess tax benefits related to the exercise of stock options		2,105		886		1,221

The Company uses the Black-Scholes option pricing model to estimate the fair value of stock option awards. The following weighted-average assumptions were used for option awards issued during the years ended December 31:


	2014			2013			2012
Expected dividends		2.1	%		2.6	%		2.7	%
Expected volatility		35.8	%		34.8	%		40.1	%
Risk-free interest rate		2.3	%		1.7	%		0.8	%
Expected term (in years)		7.5			8.6			5.00
Weighted-average grant-date fair value	$	21.26		$	15.37		$	14.50

The assumptions above are based on multiple factors, including historical stock option exercise patterns and post-vesting employment termination behaviors, expected future exercise patterns and the expected volatility of the Company’s stock price.

At December 31, 2014, there was $3.2 million of unrecognized compensation cost related to stock options that is expected to be recognized over a weighted-average period of 5.1 years.

The following table represents the activity related to stock options during the periods indicated.


	Number of shares			Weighted Average Exercise Price		Aggregate Intrinsic Value (Dollars in thousands)		Weighted Average Remaining Contract Life (in years)
Outstanding options, December 31, 2011		1,097,620		$	50.14
Granted		230,665			51.69
Issued in connection with acquisition		32,863			41.30
Exercised		(92,092	)		30.43	$	1,765
Forfeited or expired		(32,981	)		56.79

Outstanding options, December 31, 2012		1,236,075		$	51.48
Granted		75,722			52.36
Exercised		(200,748	)		40.35		2,740
Forfeited or expired		(38,220	)		55.87

Outstanding options, December 31, 2013		1,072,829		$	53.47
Granted		77,434			65.31
Exercised		(267,421	)		48.57		4,612
Forfeited or expired		(15,160	)		60.38

Outstanding options, December 31, 2014		867,682		$	55.92		8,220		5.1

Exercisable options, December 31, 2012		792,444			50.05
Exercisable options, December 31, 2013		707,934			53.54
Exercisable options, December 31, 2014		562,752			55.92	$	5,449		3.7

The following table presents weighted average remaining life as of December 31, 2014 for options outstanding within the stated exercise prices:


	Options Outstanding						Options Exercisable
Exercise Price Range Per Share	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Life		Number of Options		Weighted Average Exercise Price
$34.33 to $51.69		182,416	$	49.24		4.3 Years		118,312	$	48.53
$51.70 to $52.35		111,197		52.33		7.1 Years		43,156		52.33
$52.36 to $54.68		146,995		53.43		6.5 Years		90,146		54.10
$54.69 to $57.60		142,360		56.52		3.7 Years		120,873		56.68
$57.61 to $59.83		105,666		58.38		1.5 Years		105,666		58.38
$59.84 to $111.71		179,048		65.06		6.7 Years		84,599		65.89

Total options		867,682	$	55.92		5.1 Years		562,752	$	55.92

Restricted stock awards

The Company issues restricted stock under various plans for certain officers and directors. The 2005, 2008, and 2010 Incentive Plans allow grants of restricted stock. The plans allow for the issuance of restricted stock awards that may not be sold or otherwise transferred until certain restrictions have lapsed. The holders of the restricted stock receive dividends and have the right to vote the shares. The fair value of the restricted stock shares awarded under these plans is recorded as unearned share-based compensation, a contra-equity account. The unearned compensation related to these awards is amortized to compensation expense over the vesting period (generally three to seven years). The total share-based compensation expense for these awards is determined based on the market price of the Company’s common stock at the date of grant applied to the total number of shares granted and is amortized over the vesting period. As of December 31, 2014 and 2013, unearned share-based compensation associated with these awards totaled $19.8 million and $21.1 million, respectively.

The following table represents the compensation expense that was included in non-interest expense in the accompanying consolidated statements of comprehensive income related to restricted stock grants for the years ended December 31:


(Dollars in thousands)	2014		2013		2012
Compensation expense related to restricted stock	$	9,932	$	8,593	$	8,035

The following table represents unvested restricted stock award activity for the years ended December 31:


	2014			2013			2012
Balance at beginning of period		523,756			538,202			512,112
Granted		149,072			167,095			176,669
Forfeited		(167,550	)		(28,713	)		(13,164	)
Earned and issued		(18,171	)		(152,828	)		(137,415	)

Balance at end of period		487,107			523,756			538,202

Phantom stock awards

As part of the IBKC Phantom Award Plan, the 2009 Phantom Stock Plan, and the 2014 Phantom Stock Plan, the Company issues phantom stock awards to certain key officers and employees. The award is subject to a vesting period of five to seven years and is paid out in cash upon vesting. The amount paid per vesting period is calculated as the number of vested “share equivalents” multiplied by the closing market price of a share of the Company’s common stock on the vesting date. Share equivalents are calculated on the date of grant as the total award’s dollar value divided by the closing market price of a share of the Company’s common stock on the grant date. Award recipients are also entitled to a “dividend equivalent” on each unvested share equivalent held by the award recipient. A dividend equivalent is a dollar amount equal to the cash dividends that the participant would have been entitled to receive if the participant’s share equivalents were issued in shares of common stock. Dividend equivalents will be deemed to be reinvested as share equivalents that will vest and be paid out on the same date as the underlying share equivalents on which the dividend equivalents were paid. The number of share equivalents acquired with a dividend equivalent is determined by dividing the aggregate of dividend equivalents paid on the unvested share equivalents by the closing price of a share of the Company’s common stock on the dividend payment date.

The following table indicates compensation expense recorded for phantom stock based on the number of share equivalents vested at December 31 of the periods indicated and the current market price of the Company’s stock at that time.


(Dollars in thousands)	2014		2013		2012
Compensation expense related to phantom stock	$	5,496	$	4,855	$	2,185

The following table represents phantom stock award activity during the periods indicated.


	Number of share equivalents			Dividend equivalents			Total share equivalents			Value of share equivalents ⁽¹⁾
Balance, December 31, 2011		232,921			8,942			241,863		$	11,924,000
Granted		119,038			9,152			128,190			6,297,000
Forfeited share equivalents		(10,949	)		(367	)		(11,316	)		556,000
Vested share equivalents		(22,281	)		(1,692	)		(23,973	)		1,180,000

Balance, December 31, 2012		318,729			16,035			334,764		$	16,444,000
Granted		169,662			11,189			180,851			11,366,000
Forfeited share equivalents		(18,975	)		(785	)		(19,760	)		1,242,000
Vested share equivalents		(52,178	)		(4,088	)		(56,266	)		2,922,000

Balance, December 31, 2013		417,238			22,351			439,589		$	27,628,000
Granted		118,859			9,566			128,425			8,328,000
Forfeited share equivalents		(19,736	)		(1,754	)		(21,490	)		1,394,000
Vested share equivalents		(75,331	)		(7,515	)		(82,846	)		5,512,000

Balance, December 31, 2014		441,030			22,648			463,678		$	30,070,000

⁽¹⁾

Except for share equivalents at the beginning of each period, which are based on the value at that time, and vested share payments, which are based on the cash paid at the time of vesting, the value of share equivalents is calculated based on the market price of the Company’s stock at the end of the respective periods. The market price of the Company’s stock was $64.85, $62.85 and $49.12 on December 31, 2014, 2013 and 2012, respectively.

Restricted Share Units

In 2014, the Company issued shares of restricted share units to some of the executive officers. Restricted share units vest after the end of a three-year performance period, based on satisfaction of the performance conditions set forth in the restricted share unit agreement. Recipients do not possess voting or investment power over the common stock underlying such units until vesting. The value of these restricted share units is the same as the value of the corresponding number of shares of common stock.

Performance Units

In 2014, the Company issued shares of performance units to some of the executive officers. Performance units vest after the end of a three-year performance period, based on satisfaction of the performance conditions set forth in the performance unit agreement. Performance units are tied to the value of shares of the Company’s common stock, are payable in cash, and vest in increments of one-third per year after attainment of one or more performance measures. The value of performance unit is the same as the value of the corresponding number of shares of common stock.

401(k) defined contribution plan

The Company has a 401(k) Profit Sharing Plan covering substantially all of its employees. Annual employer contributions to the plan are set by the Board of Directors. The Company made contributions of $1.5 million, $1.3 million, and $1.3 million for the years ended December 31, 2014, 2013, and 2012, respectively. The Plan provides, among other things, that participants in the Plan be able to direct the investment of their account balances within the Profit Sharing Plan into alternative investment funds. Participant deferrals under the salary reduction election may be matched by the employer based on a percentage to be determined annually by the employer.