Note 19 - Employee and Director Benefit Plans
 12 Months Ended
Dec. 31, 2016
Notes to Financial Statements  
Stockholders' Equity Note Disclosure [Text Block]
NOTE
19
– EMPLOYEE AND DIRECTOR BENEFIT PLANS
 
Employment Contracts
-
Employment agreements are used from time to time to ensure a stable and competent management base. The Company’s Chief Executive Officer, Chief Financial Officer, President, and Chief Risk Officer are each subject to an employment agreement. Each executive’s agreement is for an initial term of
three
years and is subject to automatic
one
-year renewals on the
third
anniversary of its initial effective date and each successive anniversary unless either party provides timely notice of non-renewal.
The agreements provide for benefits as spelled out in the contracts and cannot be terminated by the Company, except for cause, without prejudicing the officers’ rights to receive certain vested rights, including compensation. In the event of a change in control of the Company and in certain other events, as defined in the agreements, the Company or any successor to the Company will be bound to the terms of the contracts.
 
The Company has inherited from its mergers a number of individual deferred compensation and supplemental retirement agreements with certain employees, former employees and directors who were previously officers or directors of the predecessor company that provide for salary continuation benefits upon retirement. These individual agreements also provide for benefits in the event of early retirement, death or substantial change in control of the Company. The expense associated with these plans was
$421
thousand,
$421
thousand and
$431
thousand for the years ended
December
31,
2016,
2015
and
2014,
respectively. The total liability associated with these assumed supplemental retirement plans was
$8.1
million and
$8.1
million as of
December
31,
2016
and
2015,
respectively.
 
To assist funding the above liabilities, the acquired entities had insured the lives of certain directors and officers. Earnings on those policies are used to offset employee benefit expenses. The Company also purchased and owns Bank-Owned Life Insurance (“BOLI”) policies on certain key officers of the Company, including the Chief Executive Officer, the President and the Chief Risk Officer. The Company is the current owner and beneficiary of the policies and has the right to exercise all incidents of ownership. Cash surrender values of BOLI policies, including BOLI policies acquired in mergers, at
December
31,
2016
and
2015
were
$70.8
million and
$58.6
million, respectively. In
2016,
the Company received
$597
thousand in death proceeds from
two
policies, resulting in
$402
thousand of additional noninterest income. In
2015,
the Company received
$1.6
million in death proceeds from
three
policies, resulting in
$737
thousand of additional noninterest income. In
2014,
the Company received
$1.1
million in death proceeds from
two
policies, resulting in
$651
thousand of additional noninterest income.
 
Certain BOLI policies acquired through mergers are subject to split dollar arrangements, wherein under separate agreement with the insured party, the insured party has the right to designate a beneficiary for an amount equal to
50
percent of the difference between the total policy death proceeds and the policy cash surrender value at the date of the employee’s death up to
$100,000.
For these split dollar arrangements, once vested in the benefit, the insured party has the right to continue to designate a beneficiary after retirement from the Company. As a result, the Company has recognized a liability as the split dollar arrangement effectively provides a post-employment retirement benefit after separation of service from the Company. The liability accrued for split dollar agreements that provide a post-retirement benefit at
December
31,
2016
and
2015
was
$3.1
million and
$2.1
million, respectively. The expense associated with these split dollar arrangements was
$140
thousand,
$105
thousand and
$304
thousand for the years ended
December
31,
2016,
2015,
and
2014,
respectively.
 
The Company maintains a deferred compensation plan whereby certain employees and directors are given the option to defer compensation until retirement or separation of employment. Interest is accrued on the balances at the Wall Street Journal prime rate,
3.50%
at
December
31,
2016,
with a floor of at least
0.50%.
The expense associated with this plan was
$43
thousand,
$26
thousand and
$23
thousand for the years ended
December
31,
2015,
2014
and
2013,
respectively. The total liability accrued for the deferred compensation plan was
$13.4
million and
$11.6
million at
December
31,
2016
and
2015,
respectively.
 
 
Retirement Savings -
The Company has a profit sharing and
401(k)
plan for the benefit of substantially all employees subject to certain minimum age and service requirements. Under this plan, the Company matches
100%
of employee contributions to a maximum of
3%
of annual compensation and
50%
of employee contributions greater than
3%
to a maximum of
6%
of annual compensation, up to an annual compensation generally equal to the Internal Revenue Service’s compensation threshold in effect from time to time.
 
The Company’s contribution expense under the profit sharing and
401(k)
plan was
$1.3
million,
$1.2
million and
$1.1
million for the years ended
December
31,
2016,
2015
and
2014,
respectively.
 
Share Based Plans
-
The Company maintains share-based plans for directors and employees. During
2010,
the Board of Directors of the Bank adopted and shareholders approved, the Park Sterling Bank
2010
Stock Option Plan for Directors and the Park Sterling Bank
2010
Employee Stock Option Plan (the
“2010
Bank Plans”), which provided for an aggregate of
1,859,550
shares of Common Stock reserved for the granting of options. The
2010
Bank Plans were substantially similar to the Bank’s
2006
option plans for directors and employees, which provided for an aggregate of
990,000
of shares of Common Stock reserved for options. Upon effectiveness of the holding company reorganization on
January
1,
2011,
the Company assumed all outstanding options under the
2010
Bank Plan and the Bank’s
2006
plans, and the Company’s Common Stock was substituted as the stock issuable upon the exercise of options under these plans. As a result, there will be
no
further awards under the
2010
Bank Plans. At
December
31,
2016,
there were options to purchase
1,199,583
shares of Common Stock outstanding under the
2010
Bank Plans and the Bank’s
2006
plans.
 
Also during
2010,
the Board of Directors of the Company adopted and shareholders approved the Park Sterling Corporation
2010
Long-Term Incentive Plan for directors and employees ( the
“2010
LTIP”), which was effective upon the holding company reorganization and replaced the
2010
Plans. The
2010
LTIP provided for an aggregate of
1,016,400
of shares of Common Stock reserved for issuance to employees and directors in connection with stock options, restricted stock awards, and other stock-based awards. At
December
31,
2016,
there were options to purchase
105,840
shares of Common Stock and
21,300
unvested restricted stock awards outstanding under the
2010
LTIP. The
2010
LTIP was frozen upon effectiveness of the Company’s
2014
Long Term Incentive Plan (described below), and
no
future awards
may
be made thereunder.
 
 
In
March
2014,
the Board of Directors of the Company adopted and in
May
2014
shareholders approved the Park Sterling Corporation
2014
Long-Term Incentive Plan for directors and employees (the
“2014
LTIP”), which replaced the
2010
LTIP. An aggregate of
1,000,000
of shares of Common Stock, plus any shares subject to an award granted under the
2010
LTIP that was outstanding on
March
26,
2014
that
may
expire, be forfeited or otherwise terminate unexercised, have been reserved for issuance to employees and directors under the
2014
LTIP in connection with stock options, restricted stock awards, and other stock-based awards. The
2014
LTIP will expire on
May
23,
2024
and no awards
may
be made after that date. At
December
31,
2016,
there were
384,432
unvested restricted stock awards outstanding under the
2014
LTIP with a remaining capacity of
430,579
shares available to be issued.
 
As a result of the Citizens South merger, at the effective date of the merger, the Company assumed the awards outstanding under the Citizens South Bank
1999
Stock Option Plan (the
“1999
Citizens South Plan”) and the Citizens South Banking Corporation
2008
Equity Incentive Plan (the
“2008
Citizens South Plan”), each of which has been renamed as a Park Sterling Corporation plan.
 
In addition, under the
2008
Citizens South Plan, the Company retained the right to grant future non-qualified stock options and stock appreciation rights (“SARs”) to eligible employees and directors of, or service providers to, the Company or the Bank who were not employees or directors of or service providers to the Company or the Bank at the effective time of the merger. Stock options and SARS are evidenced by an award agreement that specifies, as applicable, the number of shares, date of grant, exercise price, vesting period and expiration date, and other information. Awards under the plan have an exercise price at least equal to the fair market value of the Common Stock on the grant date, cannot be exercised more than
10
years after the grant date and generally expire or are forfeited upon termination of employment prior to the end of the award term, except in limited circumstances such as death, disability, retirement or change in control. The
2008
Citizens South Plan was frozen in
May
2014
upon effectiveness of the
2014
LTIP, and as a result
no
future awards
may
be made under the plan. At
December
31,
2016,
there were options to purchase
99,774
shares of Common Stock outstanding under the
2008
Citizens South Plan.
 
The
1999
Citizens South Plan was frozen at the time of merger, and no future awards could be granted under this plan thereafter. At
December
31,
2016,
there were options to purchase
318
shares of Common Stock outstanding under the
1999
Citizens South Plan.
 
As a result of the First Capital merger, at the effective date of the merger, the Company assumed the First Capital Bancorp, Inc.
2010
Stock Incentive Plan, which has been renamed as a Park Sterling plan (the
“2010
First Capital Plan”), to retain the right to grant future stock options, restricted stock and other share-based awards to eligible employees and directors of the Company who were not employees or directors of the Company or the Bank at the effective time of the merger. Options granted under the plan generally must have an exercise price at least equal to the fair market value of the Common Stock on the date of grant, and the term of any incentive stock option cannot be longer than
ten
years. Awards under the plan generally will expire or be forfeited upon termination of employment prior to the end of the award term, except as otherwise provided in the applicable award agreement. As of
December
31,
2016,
the Company had
not
granted any awards under the
2010
First Capital Plan, and
184,789
shares remained available for future grants of awards under the plan. The
2010
First Capital Plan will expire on
May
19,
2020.
 
The exercise price of each option under these plans is not less than the market price of the Company’s Common Stock on the date of the grant. The exercise price of all options outstanding at
December
31,
2016
under these plans ranges from
$3.04
to
$15.45
and the average exercise price was
$7.25.
The Company funds the option shares from authorized but unissued shares. The Company does not typically purchase shares to fulfill the obligations of the stock benefit plans. Options granted become exercisable in accordance with the plans’ vesting schedules which are generally
three
years. All unexercised options expire
ten
years after the date of the grant.
 
As contemplated during the Public Offering, in
2011
the Company awarded certain stock price performance-based restricted shares under the
2010
LTIP to officers and directors following the holding company reorganization that were designed to vest
one
-
third
each when the Company’s stock price per share reached the following performance thresholds for
30
consecutive trading days: (i)
125%
of offer price
($8.13);
(ii)
140%
of offer price
($9.10);
and (iii)
160%
of offer price
($10.40).
As of
December
31,
2015,
there were
554,400
of these unvested restricted shares outstanding. Prior to
2016,
13,860
of these restricted shares were forfeited. During the
first
quarter of
2016,
117,810
of these restricted shares vested in accordance with a separation agreement between the Company and
one
of the holders of the restricted shares. The remaining
436,590
unvested stock price performance-based restricted shares vested during
2016
as follows: the
first
performance goal was met and
145,530
shares vested as of
September
28,
2016;
the
second
performance goal was met and
145,530
shares vested as of
December
22,
2016;
and the Compensation and Development Committee of the Board of Directors approved the early vesting of the final
145,530
shares, also as of
December
22,
2016.
As of
December
31,
2016
there were
no
unvested stock price performance-based restricted shares outstanding.
 
Activity in the Company’s share-based plans is summarized in the following tables:
 
 
 
Outstanding Options
 
 
 
 
 
 
 
Weighted
 
 
 
 
 
 
Weighted
 
 
Weighted
 
 
 
 
 
 
 
 
 
 
 
Average
 
 
 
 
 
 
Average
 
 
Average
 
 
 
 
 
 
 
Number
 
 
Exercise
 
 
Non-Vested
 
 
Exercise
 
 
Contractual
 
 
Intrinsic
 
 
 
Outstanding
 
 
Price
 
 
Options
 
 
Price
 
 
Term (Years)
 
 
Value
 
                                                 
At December 31, 2013
   
2,225,551
    $
7.35
     
49,446
    $
5.19
     
5.65
    $
1,471,095
 
Options granted
   
17,500
     
6.70
     
17,500
     
6.70
     
 
      
 
  
Options exercised
   
(54,199
 )    
4.67
     
-
     
-
     
 
      
 
  
Expired and forfeited
   
(26,512
 )    
9.07
     
(4,999
 )    
4.46
     
 
      
 
  
Options vested
   
-
     
-
     
(42,780
 )    
5.28
     
 
      
 
  
                                                 
At December 31, 2014
   
2,162,340
    $
7.40
     
19,167
    $
6.39
     
4.69
    $
1,668,621
 
Options granted
   
-
     
-
     
-
     
-
     
 
      
 
  
Options exercised
   
(38,160
 )    
4.90
     
-
     
-
     
 
      
 
  
Expired and forfeited
   
(29,687
 )    
9.19
     
-
     
-
     
 
      
 
  
Options vested
   
-
     
-
     
(7,500
 )    
6.33
     
 
      
 
  
                                                 
At December 31, 2015
   
2,094,493
    $
7.43
     
11,667
    $
6.70
     
3.73
    $
1,518,937
 
Options granted
   
-
     
-
     
-
     
-
     
 
      
 
  
Options exercised
   
(684,978
 )    
7.81
     
-
     
-
     
 
      
 
  
Expired and forfeited
   
(4,000
 )    
5.45
     
-
     
-
     
 
      
 
  
Options vested
   
-
     
-
     
(10,000
 )    
6.62
     
 
      
 
  
                                                 
At December 31, 2016
   
1,405,515
    $
7.25
     
1,667
    $
6.62
     
3.18
     
5,412,428
 
                                                 
                                                 
Exercisable at December 31, 2016
   
1,403,848
    $
7.25
     
 
      
 
      
3.71
     
 
  
 
 
 
Nonvested Restricted Shares
 
 
 
 
 
 
 
Weighted
 
 
 
 
 
 
 
 
 
 
 
Average
 
 
Aggregate
 
 
 
Number
 
 
Grant Date
 
 
Intrinsic
 
 
 
Outstanding
 
 
Fair Value
 
 
Value
 
                         
At December 31, 2013
   
770,399
    $
4.35
     
5,315,008
 
                         
Restricted shares granted
   
238,613
     
6.53
     
1,753,806
 
Expired and forfeited
   
(7,250
 )    
5.67
     
(53,287
 )
Restricted shares vested
   
(80,667
 )    
5.40
     
(592,906
 )
Change in intrinsic value of stock price based performance grants
   
-
     
-
     
347,428
 
At December 31, 2014
   
921,095
    $
4.81
     
6,770,049
 
                         
Restricted shares granted
   
220,100
     
6.72
     
1,555,287
 
Expired and forfeited
   
(26,852
 )    
5.96
     
(1,134,881
 )
Restricted shares vested
   
(155,038
 )    
6.40
     
(196,527
 )
Change in intrinsic value of stock price based performance grants
   
-
     
-
     
(27,633
 )
At December 31, 2015
   
959,305
    $
5.02
     
6,966,295
 
                         
Restricted shares granted
   
269,284
     
7.39
     
2,920,318
 
Expired and forfeited
   
(66,163
 )    
6.97
     
(808,510
 )
Restricted shares vested
   
(756,694
 )    
4.59
     
(6,624,024
 )
Change in intrinsic value of stock price based performance grants
   
-
     
-
     
1,923,768
 
At December 31, 2016
   
405,732
    $
5.02
     
4,377,846
 
 
 
There were
17,500
options granted during
2014.
The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model. The average grant date fair value per share of options granted in
2014
was
$6.70.
There were no stock options granted during
2016
or
2015.
Assumptions used for grants in
2014
were as follows: 
 
Assumptions in Estimating Option Values
 
         
 
 
2014
 
Weighted-average volatility
    
38.74
 %
Expected dividend yield
    
1
 %
Risk-free interest rate
    
2.19
 %
Expected life (years)
    
7
  
 
The fair value of options vested was
$9
thousand,
$20
thousand and
$100
thousand for the years ended
December
31,
2016,
2015
and
2014,
respectively.
 
There were
269,284,
220,100
and
238,613
shares of restricted stock granted during
2016,
2015
and
2014,
respectively. The average grant date fair value of restricted shares granted in
2016,
2015
and
2014
was
$7.39,
$6.72
and
$6.53,
respectively.
 
The Company recognized compensation expense for share-based compensation plans of
$1.4
million,
$1.2
million and
$1.1
million for the years ended
December
31,
2016,
2015
and
2014,
respectively. At
December
31,
2016,
unrecognized compensation expense related to non-vested stock options of
$53
thousand was expected to be recognized over a weighted-average period of
0.26
years and unrecognized compensation expense related to restricted shares of
$2.3
million was expected to be recognized over a weighted-average period of
1.04
years. At
December
31,
2015,
unrecognized compensation expense related to non-vested stock options of
$20
thousand was expected to be recognized over a weighted-average period of
0.72
years and unrecognized compensation expense related to restricted shares of
$1.8
million was expected to be recognized over a weighted-average period of
1.02
years.