EQUITY-BASED COMPENSATION

6 Months Ended

Jun. 30, 2012

EQUITY-BASED COMPENSATION

NOTE 7 -EQUITY-BASED COMPENSATION

The Company measures and recognizes compensation expense for all equity-based payments.  The compensation expense is recognized based on the grant-date fair value of those awards.  All of the Company’s existing stock option awards have been determined to be equity-classified awards.

The Company’s 2011 Equity Incentive Plan provides for the granting of options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, and other equity-based award or incentive award up to an aggregate of 2,318,290 shares of the Company’s common stock.  Options granted may be either incentive stock options or nonqualified stock options.  Vesting terms may vary with each grant, and option terms are generally five to ten years.

Concurrent with the completion of the IPO, the Company granted options to purchase 940,000 shares of the Company’s common stock.  Options to purchase shares of common stock were granted with exercise prices equal to $9.75 per share, the fair value of the common stock on the date of grant.  Options vest on a ratable basis over a five year period following the date of grant and option terms are generally five to ten years following the date of grant. The fair value of stock options granted was estimated using a Black-Scholes valuation model with the following assumptions:

	2011
Expected dividend yield at date of grant		5.09	%
Expected stock price volatility		56.6	%
Risk-free interest rate		2.57	%
Expected life of options (in years)		6.5

The risk-free interest rate assumptions were based on the U.S. Treasury yield curve in effect at the time of the grant.  The expected volatility was based on historical monthly price changes of a peer group of comparable entities based on the expected life of the options at the date of grant.  The expected life of options is the average number of years the Company estimates that options will be outstanding.  The Company considers groups of associates that have similar historical exercise behavior separately for valuation purposes.

The following table summarizes stock option activity under the Company’s 2011 Equity Incentive Plan for the six months ended June 30, 2012:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Terms (years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2011		940,000		$	9.75		9.1	$	-
Granted		-		$	-		-	$	-
Exercised		-		$	-		-	$	-
Cancelled		(47,000	)	$	9.75		-	$	-
Outstanding at June 30, 2012		893,000		$	9.75		8.7	$	-	(¹)
Exercisable at June 30, 2012		178,600		$	9.75		8.7	$	-
(1) Exercise price exceeds our market price at June 30, 2012.

Concurrent with the completion of the IPO, the Company granted 4,000 shares of stock to directors of the Company under the 2011 Equity Incentive Plan and recognized $39,000 of compensation expense. These shares vested concurrent with the grant. On June 7, 2012, the Company granted 15,288 shares of stock to directors of the Company under the 2011 Equity Incentive Plan and recognized $120,011 of compensation expense.  These shares vested concurrent with the grant.

Under the 2011 Equity Incentive Plan, the Company awarded 192,739 restricted shares to the executive officers on April 25, 2012.  The shares issued vest over a period of time as determined by the Board at the date of grant.  The Company recognizes compensation expense for non-vested shares on a straight-line basis over the vesting period based upon the fair market value of the shares on the date of issuance, adjusted for forfeitures.

A summary of the non-vested shares as of June 30, 2012 is as follows:

	Number of Shares		Weighted Average Grant Date Fair Value
Non-vested at January 1, 2012		-	$
Granted		192,739		7.78
Vested		-
Forfeited		-
Non-vested at June 30, 2012		192,739	$	7.78

For the three and six months ended June 30, 2012, the Company recognized $142,810 of share-based compensation expense related to these restricted share awards.  As of June 30, 2012, there was $1.4 million of total unrecognized compensation costs related to non-vested share awards.  These costs are expected to be primarily recognized over an average period of 2.75 years.