Note 6. Stock Options, ESOP, and Restricted Shares

2010 Equity Incentive Plan

The Athens Bancshares Corporation 2010 Equity Incentive Plan (“the 2010 Plan”) was approved by the Company’s stockholders at the annual meeting of stockholders held on July 14, 2010. Under the terms of the 2010 Plan, the Company may grant restricted stock awards and stock options to its employees, officers, and directors. The purpose of the 2010 Plan is to promote the success of the Company by linking the personal interests of its employees, officers, and directors to the interest of the Company’s shareholders, and by providing participants with an incentive for remarkable performance. All of the Company’s employees, officers, and directors are eligible to participate in the 2010 Plan.

Under terms of the 2010 Plan, the Company is authorized to issue up to 277,725 stock options and up to 111,090 shares of restricted stock.

The Company granted stock options to its directors, officers, and employees on December 15, 2010. Both incentive stock options and non-qualified stock options were granted under the 2010 Plan. The exercise price for each option was equal to the market price of the Company’s stock on the date of grant and the maximum term of each option is ten years. The vesting period for all options is five years, pro rata, from the date of grant. The Company recognizes compensation expense over the vesting period, based on the grant-date fair value of the options granted. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model. For the three months ended March 31, 2013 and 2012, the Company recorded stock compensation expense of $13,537 and $13,537, respectively. At March 31, 2013, the total remaining compensation cost to be recognized on non-vested options is approximately $135,376.

A summary of the activity in the 2010 Plan for the three months ended March 31, 2013, is presented in the following table:


	Three Months Ended March 31, 2013

	Shares	Average Exercise Price	Aggregate Intrinsic Value (1)

Outstanding at December 31, 2012	236,062	$ 11.50	-
Granted	-	N/A	-
Exercised	-	N/A	-
Forfeited	-	N/A	-


Outstanding at March 31, 2013	236,062	$ 11.50	$ 1,581,615


Options exercisable at March 31, 2013	94,425	$ 11.50	$ 632,646

(1) The aggregate intrinsic value of a stock option in the table above represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) that would have been received by the option holders had all option holders exercised their options on March 31, 2013. This amount changes based on changes in the market value of the Company’s stock.

Other information regarding options outstanding and exercisable as of March 31, 2013, is as follows:


	Options Outstanding				Options Exercisable

Exercise Price	Number of Shares	Weighted- Average Exercise Price	Weighted- Average Remaining Contractual Life In Years	Number of Shares		Weighted- Average Exercise Price

$ 11.50	236,062	$ 11.50	7.75	94,425		$ 11.50

Information pertaining to non-vested options for the three months ended March 31, 2013, is as follows:


	Number of Shares	Weighted Average Grant Date Fair Value

Non-vested options, December 31, 2012	141,637	$ 1.27
Granted	-	-
Vested	-	-
Forfeited	-	-


Non-vested options, March 31, 2013	141,637	$ 1.27

On January 19, 2011, the Company awarded 94,426 shares of restricted stock to its directors, officers, and employees pursuant to the terms of the 2010 Plan. Compensation expense associated with the performance-based share awards is recognized over the time period that the restrictions associated with the awards lapse based on the total cost of the award, which is the fair market value of the stock on the date of the grant. The closing price on the date of the grants issued on January 19, 2011 was $12.75 per share.

On December 19, 2012, the Company awarded 16,664 shares of restricted stock to its officers and employees pursuant to the terms of the 2010 Plan. The closing price on the date of the grants issued on December 19, 2012 was $16.65.

For the three months ended March 31, 2013 and 2012, the Company recognized $74,070 and $60,197, respectively, in compensation expense attributable to shares that have been awarded.

A summary of activity for unvested restricted awards for the three months ended March 31, 2013 is as follows:


	Number	Grant Date Weighted- Average Cost

Unvested at December 31, 2012	92,205	$ 13.45
Shares awarded	-	-
Restrictions lapsed and shares released	(18,885)	12.75
Shares forfeited	-	-

Unvested at March 31, 2013	73,320	$ 13.63

Employee Stock Ownership Plan (ESOP)

The Company sponsors a leveraged ESOP that covers substantially all employees who meet certain age and eligibility requirements. As part of the initial public offering, the ESOP purchased 222,180 shares, or approximately 8% of the 2,777,250 shares issued, with the proceeds of a 15 year loan from the Company which is payable in annual installments and bears interest at 3.25% per annum.

The Bank has committed to make contributions to the ESOP sufficient to support the debt service of the loan. The loan is secured by the unallocated shares, which are held in a suspense account, and are allocated among the participants as the loan is repaid. Cash dividends paid on allocated shares are distributed to the participant and cash dividends paid on unallocated shares are used to repay the outstanding debt of the ESOP.

ESOP shares are held by the plan trustee in a suspense account until allocated to participant accounts. Shares released from the suspense account are allocated to participants on the basis of their relative compensation in the year of allocation. Participants become vested in the allocated shares upon four years of employment with the Company. Any forfeited shares are allocated to other participants in the same proportion as contributions.

As ESOP shares are allocated to participants, the Company recognizes compensation expense equal to the fair value of the earned ESOP shares. No compensation expense has been recorded for the three months ended March 31, 2013 or 2012.

A detail of ESOP shares as of March 31, 2013 and December 31, 2012, is as follows:


	2013	2012

Allocated shares	44,436	44,436
Unallocated shares	177,744	177,744

Total ESOP shares	222,180	222,180

Fair value of unreleased shares	$ 3,234,941	$ 2,934,553