(11)Stock–Based Compensation Plan

Stock Options

The Company grants stock options to certain employees and independent directors pursuant to its 2007 Equity Incentive Plan (Plan), as amended, which was originally adopted on April 23, 2007. Under the Plan, a maximum of 2,671,980 share awards may be granted.

Stock options granted to employees have a vesting period of four years from grant date, with 25% vesting after one year, and 1/48th vesting each month thereafter until fully vested. Stock options granted to independent directors vest in one year. All of the stock options have a contractual term of ten years.

The following table summarizes the Company’s stock option activities for the three years ended December 31, 2016:



				Weighted
				Average
		Weighted		Remaining		Aggregate
		Average		Contractual		Intrinsic
	Number of	Exercise		Term		Value
	Shares	Price		(in years)		(in thousands)
Options outstanding, December 31, 2013	1,263,485	$	14.84
Options granted	170,000	$	22.09
Options forfeited	(5,417)	$	22.55
Options exercised	(7,319)	$	15.60
Options outstanding, December 31, 2014	1,420,749	$	15.67
Options granted	183,000	$	21.72
Options exercised	(414,494)	$	11.45
Options outstanding, December 31, 2015	1,189,255	$	18.08
Options granted	245,000	$	7.87
Options forfeited/cancelled	(6,000)	$	21.99
Options outstanding, December 31, 2016	1,428,255	$	16.31		5.7	$	896
Options exercisable at December 31, 2016	1,051,969	$	17.56		4.5	$	700
Expected to vest after December 31, 2016	376,286	$	12.80		8.9	$	196

The aggregate intrinsic value represents the value by which the Company’s closing stock price of $8.67 per share on the last trading day of the year ended December 31, 2016 exceeds the exercise price of the stock multiplied by the number of options outstanding or exercisable, excluding options that have a zero or negative intrinsic value. The aggregate intrinsic value of options exercised during 2015 and 2014, based on the closing share price on the date each option was exercised, was $4.9 million and less than $0.1 million, respectively.

The Company recorded stock-based compensation expense of $1.3 million, $1.5 million and $1.6 million relating to stock options for the years ended December 31, 2016, 2015 and 2014, respectively. As of December 31, 2016, the remaining unamortized stock-based compensation cost relating to stock options granted to the Company’s employees and independent directors was approximately $2.0 million which is to be recognized over the remaining weighted average vesting period of approximately 2.3 years.

The total fair value of stock options granted to the Company’s employees and independent directors at the time of grant was approximately $0.9 million, or $3.55 per share, $1.7 million, or $9.20 per share, and $1.9 million, or $11.02 per share for the years ended December 31, 2016, 2015 and 2014, respectively, calculated using the Black-Scholes-Merton pricing model under the following weighted average assumptions:



	2016		2015		2014
Stock price	$	7.87	$	21.72	$	22.09
Exercise price	$	7.87	$	21.72	$	22.09

Expected term (years)		5.5 - 6.25		5.5 - 6.25		5.5 - 6.25
Expected volatility (%)		45.4 - 46.7		39.5 - 41.8		44.8 - 53.5
Risk-free interest rate (%)		1.30 - 1.40		1.85 - 2.00		1.79 - 1.98
Dividend yield (%)		-		-		-

The expected option term is calculated using the simplified method in accordance with SEC guidance. The expected volatility was derived from the average volatility of the Company’s stock over a period approximating the expected term of the options. The risk-free rate is based on daily U.S. Treasury yield curve with a term approximating the expected term of the options. No forfeiture was estimated on all options granted during the years ended December 31, 2016, 2015 and 2014 as management believes that none of the grantees will leave the Company within the option vesting period.

Restricted Stock

The Company grants restricted stock to certain employees pursuant to the Plan. The restricted stock is valued based on the closing price of the Company’s stock on the date of grant and has a vesting period of four years. The following table summarizes the activity of restricted stock under the Plan:



	Number of	Weighted
	Shares of	Average
	Restricted	Grant Date
	Stock	Fair Value
Restricted stock outstanding, December 31, 2013	28,150	$	26.11
Restricted stock granted	23,500	$	22.09
Restricted stock vested	(7,648)	$	26.13
Restricted stock forfeited	(1,500)	$	26.41
Restricted stock outstanding, December 31, 2014	42,502	$	23.87
Restricted stock granted	21,000	$	21.15
Restricted stock vested	(15,477)	$	23.81
Restricted stock outstanding, December 31, 2015	48,025	$	22.70
Restricted stock granted	34,500	$	7.87
Restricted stock vested	(14,379)	$	23.61
Restricted stock forfeited	(2,344)	$	21.96
Restricted stock outstanding, December 31, 2016	65,802	$	14.75

The Company recognized stock-based compensation expense relating to restricted stock of $0.4 million for both the years ended December 31, 2016 and 2015, and $0.3 million for the year ended December 31, 2014. Unamortized stock-based compensation expense relating to restricted stock as of December 31, 2016 was $0.7 million, which will be recognized over the remaining average vesting period of 2.2 years.

Stock-based compensation expense is recorded as a component of administrative expenses in the Company’s consolidated statements of income with a corresponding credit to additional paid-in capital in the Company’s consolidated balance sheets.