Stock-Based Compensation

6 Months Ended

Jun. 30, 2013

Stock-Based Compensation

Stock-Based Compensation

5. Stock-Based Compensation

The Company maintains a stock incentive plan which authorizes the issuance of up to 442,750 shares of common stock. Of those shares, 14,751 were subject to outstanding options and 115,573 were reserved for future grants at June 30, 2013.  The plan provides for granting eligible participants stock options or other stock awards, as described by the plan, at option prices ranging from 85% to 110% of fair market value at the date of grant.  Options granted expire up to seven years after the date of grant.  Such options generally become exercisable over a one to three year period.

The Company charged compensation cost of approximately $3,800 against income for the three months ended June 30, 2013 and approximately $4,500 for the three months ended June 30, 2012.  For the first six months of 2013, the Company charged compensation cost of approximately $6,400 against income and approximately $9,000 for the same period in 2012.  As of June 30, 2013 there was approximately $27,000 of unrecognized compensation cost related to unvested share-based compensation awards granted.  That cost is expected to be recognized over the next three years.

The Company receives a tax deduction for certain stock option exercises during the period in which the options are exercised, generally for the excess of the market price at the time the stock options are exercised over the exercise price of the options, which increased the APIC pool, which is the amount that represents the pool of excess tax benefits available to absorb tax shortages.  There were no excess tax benefits recognized during the three or six month periods ended June 30, 2013 and 2012.  The Company’s APIC pool totaled approximately $111,000 at June 30, 2013 and December 31, 2012.

Proceeds from the exercise of stock options were approximately $63,000 and $11,000 for the six months ended June 30, 2013 and 2012, respectively.

The fair value of options granted during the six months ended June 30, 2013 and 2012 was estimated using the Black-Scholes option pricing model with the following assumptions:

	2013	2012
Dividend yield	0%	0%
Expected volatility	43.9%	41.8%
Expected life of option	Five Years	Five Years
Risk-free interest rate	0.7%	0.8%
Fair value of each option on grant date	$4.72	$2.73

There were 4,250 and 750 options granted during each of the six months ended June 30, 2013 and 2012, respectively.

Stock option activity during the six months ended June 30, 2013 was as follows:

			Weighted
			Average
			Exercise
	Shares		Price
Outstanding at beginning of period	21,362		$	6.72
Granted	4,250		12.56
Exercised	(10,361	)	6.13
Expired and forfeited	(500	)	12.56
Outstanding at June 30, 2013	14,751		8.62
Exercisable at June 30, 2013	5,832		6.91

The aggregate intrinsic value of all options outstanding and for those exercisable at June 30, 2013 was approximately $53,000 and $31,000, respectively.