Stock-Based Compensation

9 Months Ended

Sep. 30, 2013

Stock-Based Compensation

Stock-Based Compensation

Note 12 — Stock-Based Compensation

As of September 30, 2013, the Company has reserved 273,477 shares of common stock for options and other stock-based incentive awards that are still available for grant under our 2006 stock incentive plan, and 787,475 shares for options that have been granted under either the 2006 stock incentive plan or the 1998 stock option plan but have not yet been exercised. The Company issues new shares of common stock upon exercise of stock options. There were options for an aggregate of 10,000 shares granted in the first nine months of 2013.

Amounts recognized in the consolidated financial statements related to stock-based compensation are as follows:

	Three Months EndedSeptember 30,						Nine Months EndedSeptember 30,
	2013			2012			2013			2012
Total cost of stock-based compensation	$	129,594		$	116,595		$	390,269		$	350,978
Amount of income tax benefit recognized in earnings	(14,590		)	(16,897		)	(58,393		)	(62,820		)
Amount charged against net income	$	115,004		$	99,698		$	331,876		$	288,158

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model (Black-Scholes).  The Company uses historical data to estimate the expected price volatility, expected option life and expected forfeiture rate.  The Company bases its estimate of expected volatility for awards granted on daily historical trading data of its common stock for a period equivalent to the expected term of the award.

The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the estimated life of the option.  The Company estimates the expected term consistent with historical exercise and cancellation activity of its previous share-based grants with a seven year contractual term.  Forfeitures are based on historical experience.  The dividend yield is calculated based upon the dividend payments made during the prior four quarters as a percent of the average stock price for that period.

A summary of the option activity for the first nine months of 2013 is as follows:

	Number of Shares		Weighted Average Exercise Price per Share		WeightedAverage Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at December 31, 2012	838,662		$	11.84	3.9	$	2,346,063
Options granted	10,000		14.16		0.3
Options cancelled/expired	(12,075	)	14.36
Options exercised	(49,112	)	10.32
Outstanding at September 30, 2013	787,475		11.93		3.3	$	1,754,035
Exercisable at September 30, 2013	626,950		11.32		2.7	$	1,696,384

The total intrinsic value of options exercised was $10,133 and $44,382 during the three-month periods ended September 30, 2013 and 2012, respectively, and $183,421 and $336,759 during the nine-month periods ended September 30, 2013 and 2012, respectively.

A summary of the status of our unvested option shares as of September 30, 2013 is as follows:

	Number of Shares		WeightedAverage Grant Date Fair Value
Unvested at December 31, 2012	209,925		$	4.04
Options granted	10,000		$	4.45
Options cancelled	(11,025	)	$	3.83
Options vested	(48,375	)	$	4.45
Unvested at September 30, 2013	160,525		$	3.96

As of September 30, 2013, there was $459,965 of total unrecognized compensation cost related to unvested stock-based compensation granted under our plans.  That cost is expected to be recognized over a weighted-average period of 1.2 years.  The total fair value of option shares vested during the three-month periods ended September 30, 2013 and 2012 was $71,756 and $65,697, respectively, and $215,269 and $197,042 during the nine-month periods ended September 30, 2013 and 2012, respectively.