Stock-based Compensation

9 Months Ended

Sep. 30, 2015

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, 12,168 were subject to outstanding options and 108,739 were reserved for future grants at September 30, 2015. 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 $5,700 against income for the three months ended September 30, 2015 and approximately $3,500 for the three months ended September 30, 2014. For the first nine months of 2015, the Company charged compensation cost of approximately $16,100 and approximately $15,000 for the same period in 2014. As of September 30, 2015, there was approximately $45,000 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 increases additional paid in capital and reduces income taxes payable.

Proceeds from the exercise of 5,916 stock options were approximately $45,000 for the nine months ended September 30, 2014. No stock options were exercised during the nine months ended September 30, 2015.

The fair value of options granted during the nine months ended September 30, 2015 and 2014 was estimated using the Black-Scholes option pricing model with the following assumptions:


	2015	2014
Dividend yield	0%	0%
Expected volatility	42.3% - 42.4%	44.3%
Expected life of option	Five Years	Five Years
Risk-free interest rate	1.4% - 1.5%	1.7%
Fair value of each option on grant date	$5.43 - $6.14	$ 11.49

There were 7,250 and 1,250 options granted during each of the nine months ended September 30, 2015 and 2014, respectively.

Stock option activity during the nine months ended September 30, 2015 was as follows:



		Weighted
		Average
		Exercise
	Shares	Price
Outstanding at January 1, 2015	4,918	$	15.78
Granted	7,250		15.25
Exercised	—		—
Expired and forfeited	—		—
Outstanding at September 30, 2015	12,168	$	15.47
Exercisable at September 30, 2015	2,833	$	13.53

The aggregate intrinsic value of all options outstanding and for those exercisable at September 30, 2015 was approximately $14,000 and $9,000, respectively.