10.STOCK-BASED COMPENSATION

 

The Company’s 2011 Stock Incentive Plan (the “2011 Plan”) provides for the granting of incentive stock options, non-statutory stock options, and nonvested stock awards to key employees of the Company and its subsidiaries.  The 2011 Plan authorizes shares, which may be awarded to employees of the Company and its subsidiaries in the form of incentive stock options intended to comply with the requirements of Section 422 of the Internal Revenue Code of 1986 (“incentive stock options”), non-statutory stock options, and nonvested stock.  Under the plan, the option price cannot be less than the fair market value of the stock on the grant date.  A stock option’s maximum term is ten years from the date of grant and vests in equal annual installments of 20% over a five year vesting schedule.  The Company issues new shares to satisfy stock-based awards.  The following table summarizes the shares available in the plan as of September 30, 2013:

 

 

For the three month and nine month periods ended September 30, 2013 and 2012, respectively, the Company recognized stock-based compensation expense of approximately $297,000 and $622,000 ($236,000 and $505,000, net of tax), respectively, and $324,000 and $938,000 ($242,000 and $707,000, net of tax), respectively.  These expenses were approximately $0.01 per common share for the quarter ended September 30, 2013, and approximately $0.02 for the nine months ended September 30, 2013. Stock based compensation expense was $0.01 and $0.04 for the three and nine month periods, respectively, ended September 30, 2012.  

 

Stock Options

The following table summarizes the stock option activity for the nine months ended September 30, 2013:

 

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table. No options have been granted since February of 2012:

 

 

 

(1) Calculated as the ratio of historical dividends paid per share of common stock to the stock price on the date of grant.

(2) Based on the average of the contractual life and vesting schedule for the respective option.

(3) Based on the monthly historical volatility of the Company’s stock price over the expected life of the options.

(4) Based upon the U.S. Treasury bill yield curve, for periods within the contractual life of the option, in effect at the time of grant.

 

The following table summarizes information concerning stock options issued to the Company’s employees that are vested or are expected to vest and stock options exercisable as of September 30, 2013:

 

 

Nonvested Stock

The 2011 Plan permits the granting of nonvested stock but are limited to one-third of the aggregate number of total awards granted.  This equity component of compensation is divided between restricted (time-based) stock grants and performance-based stock grants.  Generally, the restricted stock vests 50% on each of the third and fourth anniversaries from the date of the grant.  The performance-based stock is subject to vesting based on achieving certain performance metrics; the grant of performance-based stock is subject to approval by the Company’s Compensation Committee in its sole discretion.   The value of the nonvested stock awards was calculated by multiplying the fair market value of the Company’s common stock on grant date by the number of shares awarded.  Employees have the right to vote the shares and to receive cash or stock dividends (restricted stock), if any, except for the nonvested stock under the performance-based component (performance stock). 

 

The following table summarizes the nonvested stock activity for the nine months ended September 30, 2013:

 

 

The estimated unamortized compensation expense, net of estimated forfeitures, related to nonvested stock and stock options issued and outstanding as of September 30, 2013 that will be recognized in future periods is as follows (dollars in thousands):