Note 13 — Share-based Compensations

At December 31, 2013, we had three incentive plans, the Year 2000 Stock Option Plan (the “2000 Plan”), the 2007 Equity Compensation Plan (the “2007 Plan”) which replaced the 2000 Plan and the 2013 Equity Compensation Plan (the “2013 Plan” and with the 2000 Plan and 2007 Plan, the “Plans”) which replaced the 2007 Plan.

The 2013 Plan provides awards of any options, stock appreciation right, restricted stock award, restricted stock unit award, share granted as a bonus or in lieu of another award, dividend equivalent, other stock-based award or performance award, together with any other right or interest to a participant under the plan. Plan participant includes executives and other employees, officers, directors, consultants and other persons who provide services to the Company or its related entities. Although no future stock options may be granted under the 2007 Plan and 2000 Plan, certain employees, directors and officers of Hanmi Financial and its subsidiaries still hold options to purchase Hanmi Financial common stock under the 2013 Plan.

Under the 2013 Plan, we may grant equity incentive awards for up to 1,500,000 shares of common stock. As of December 31, 2013, 1,078,668 shares were still available for issuance under the 2013 Plan.

The table below shows the share-based compensation expense and related tax benefits for the periods indicated:

 

		Year Ended December 31,
		2013				2012				2011
		(In thousands)
Share-based compensation expense		$	705			$	478			$	608
Related tax benefits		$	32			$	201			$	256

 

As of December 31, 2013, unrecognized share-based compensation expense was as follows:

 

		Unrecognized Expense				Average Expected Recognition Period
		(In thousands)
Stock option awards		$	1,538				2.4 years
Restricted stock awards			1,666				2.7 years
Total unrecognized share-based compensation expense		$	3,204				2.5 years

2013 and 2007 Equity Compensation Plans and 2000 Stock Option Plan

Stock Options

All stock options granted under the Plans have an exercise price equal to the fair market value of the underlying common stock on the date of grant. Stock options granted under the Plans generally vest based on three to five years of continuous service and expire 10 years from the date of grant. Certain option and share awards provide for accelerated vesting if there is a change in control (as defined in the Plan). New shares of common stock are issued or treasury shares are utilized upon the exercise of stock options.

The weighted-average estimated fair value per share of options granted under the Plans was as follows:

 

		Year Ended December 31,
		2013				2012				2011
Weighted-average estimated fair value per share of options granted		$	4.48			$	5.40			$	6.23

The weighted-average fair value per share of options granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

 

		Year Ended December 31,
		2013				2012				2011
Weighted-average assumption
Dividend yield			1.61	%			—				—
Expected volatility			43.67	%			65.23	%			103.76	%
Expected term			3.0 years				3.0 years				3.2 years
Risk-free interest rate			0.79	%			0.32	%			1.04	%

Expected volatility was determined based on the historical weekly volatility of our stock price over a period equal to the expected term of the options granted. The expected term of the options represents the period that options granted are expected to be outstanding based primarily on the historical exercise behavior associated with previous option grants. The risk-free interest rate was based on the U.S. Treasury yield curve at the time of grant for a period equal to the expected term of the options granted.

 

The following information under the Plans is presented for the periods indicated:

 

		Year Ended December 31,
		2013				2012				2011
		(In thousands, except per share data)
Grant date fair value of options granted		$	1,053			$	1,197			$	156
Fair value of options vested		$	728			$	911			$	1,272
Total intrinsic value of options exercised (1)		$	485			$	6			$	—
Cash received from options exercised		$	525			$	10			$	—
Weighted-average estimated fair value per share of options granted		$	4.48			$	5.40			$	6.23

 

(1)	Intrinsic value represents the difference between the closing stock price on the exercise date and the exercise price, multiplied by the number of options.

The following is a summary of stock option transactions under the Plans for the periods indicated:

 

		Year Ended December 31,
		2013								2012								2011
		Number of Shares				Weighted- Average Exercise Price Per Share				Number of Shares				Weighted- Average Exercise Price Per Share				Number of Shares				Weighted- Average Exercise Price Per Share
Options outstanding at beginning of period			342,950			$	37.44				143,325			$	81.27				133,361			$	95.45
Options granted			305,000			$	16.43				221,750			$	12.54				25,000			$	9.88
Options exercised			(46,113	)		$	11.37				(1,250	)		$	8.32				—			$	—
Options forfeited			(36,566	)		$	12.50				(5,375	)		$	8.61				(425	)		$	64.89
Options expired			(18,676	)		$	81.20				(15,500	)		$	98.76				(14,611	)		$	39.09
Options outstanding at end of period			546,595			$	28.09				342,950			$	37.44				143,325			$	81.27
Options exercisable at end of period			154,970			$	59.77				159,762			$	66.19				107,475			$	104.25

The following is a summary of transactions for non-vested stock options under the Plans for the periods indicated:

 

		Year Ended December 31,
		2013								2012								2011
		Number of Shares				Weighted- Average Exercise Price Per Share				Number of Shares				Weighted- Average Exercise Price Per Share				Number of Shares				Weighted- Average Exercise Price Per Share
Non-vested options outstanding at beginning of period			183,188			$	12.37				35,850			$	25.20				33,775			$	17.68
Options granted			305,000			$	16.43				221,750			$	12.54				25,000			$	9.88
Options vested			(59,997	)		$	12.14				(69,037	)		$	13.20				(22,500	)		$	56.54
Options forfeited			(36,566	)		$	12.50				(5,375	)		$	8.61				(425	)		$	64.89
Non-vested options outstanding at end of period			391,625			$	15.56				183,188			$	12.37				35,850			$	25.20

 

As of December 31, 2013, stock options outstanding under the Plans were as follows:

 

		Options Outstanding																Options Exercisable
		Number of Shares				Intrinsic Value (1)				Weighted- Average Exercise Price Per Share				Weighted- Average Remaining Contractual Life				Number of Shares				Intrinsic Value (1)				Weighted- Average Exercise Price Per Share				Weighted- Average Remaining Contractual Life
										(In thousands except share and per share data)
$10.80 to $49.99			486,195			$	3,384			$	14.93				9.27 years				94,570			$	904			$	12.33				8.43 years
$50.00 to $99.99			—				—				—				—				—				—				—				—
$100.00 to $149.99			49,150				—				126.07				1.28 years				49,150				—				126.07				1.28 years
$150.00 to $173.04			11,250				—				168.86				2.81 years				11,250				—				168.86				2.81 years
			546,595			$	3,384			$	28.09				8.41 years				154,970			$	904			$	59.77				5.76 years

 

(1)	Intrinsic value represents the difference between the closing stock price on the last trading day of the period, which was $21.89 as of December 31, 2013, and the exercise price, multiplied by the number of options.

Restricted Stock Awards

Restricted stock awards under the Plans become fully vested after three to five years of continued employment from the date of grant. Hanmi Financial becomes entitled to an income tax deduction in an amount equal to the taxable income reported by the holders of the restricted shares when the restrictions are released and the shares are issued. Restricted shares are forfeited if officers and employees terminate prior to the lapsing of restrictions. Forfeitures of restricted stock are treated as cancelled shares.

The table below provides information for restricted stock awards under the 2013 Plan for the periods indicated:

 

		2013								2012								2011
		Number of Shares				Weighted- Average Grant Date Fair Value Per Share				Number of Shares				Weighted- Average Grant Date Fair Value Per Share				Number of Shares				Weighted- Average Grant Date Fair Value Per Share
Restricted stock at beginning of period			10,500			$	10.83				19,725			$	11.66				18,200			$	14.38
Restricted stock granted			116,332			$	16.55				—			$	—				10,000			$	9.88
Restricted stock vested			(7,000	)		$	10.75				(7,225	)		$	13.78				(8,475	)		$	15.41
Restricted stock forfeited			(3,750	)		$	15.30				(2,000	)		$	8.32				—			$	—
Restricted stock at end of period			116,082			$	16.43				10,500			$	10.83				19,725			$	11.66