13. Stock-Based Compensation

The Company has three stock option and award plans for the primary benefit of its non-management directors and key employees—the 2004 Stock Option and Award Plan, the 2006 Stock Option and Award Plan and the 2010 Stock Option and Award Plan. These plans are administered by the Compensation Committee of the Board of Directors and enable the Company to make stock awards up to a total of 1.1 million common shares (net of shares cancelled and forfeited) in various forms and combinations including incentive stock options, nonqualified stock options, performance-based awards and restricted stock. Shares subject to options granted under these plans that terminate without being exercised will become available for grant. At December 31, 2012, the Company had approximately 153,000 shares that were available to grant under these plans.

Accounting for stock-based compensation requires that the cost resulting from all stock-based payments be recognized in the financial statements based on the grant-date fair value of the award. The Company's stock-based compensation expense consists of stock options and restricted stock awards. Accounting guidance on share-based payments requires companies to estimate the fair value of stock option awards on the date of the grant using an option-pricing model. The Company uses the Black-Scholes option-pricing model to determine fair value of its stock option awards. The Company determines fair value for restricted stock grants based on the grant-date fair value of our common stock. All stock option and restricted stock grants are amortized ratably over the requisite service periods of the underlying awards, which are generally the vesting periods. The Company recognizes share-based compensation expense only for those shares that are expected to vest, based on the Company's historical experience and future expectations. The Company recorded stock-based compensation expense of $1.1 million for 2012 and $0.7 million for 2011.

Stock Option Awards

The Company's stock option awards are granted with an exercise price equal to the market price of FirstCity's common stock on the date of issuance. These stock option awards generally vest based on four years of continuous service from the grant date and have ten-year contractual terms. Certain stock options issued to non-employee directors are exercisable immediately. The Company did not grant any stock option awards in 2012 and 2011.

The Company uses the Black-Scholes option-pricing model to estimate the fair value of stock option awards on the grant date. The Company uses assumptions relating to expected life of options granted, expected volatility and risk-free interest rate to determine the fair value of stock option awards. The expected life of options granted represents the period of time for which the options are expected to be outstanding, taking into account the percentage of option exercises, the percentage of options that expire unexercised and the percentage of options outstanding. The expected volatility is based on the historical volatility of the Company's common stock over the estimated expected life of the options. The risk-free interest rate is derived from the U.S. Treasury rate with a maturity date corresponding to the stock options' expected life. The Company does not currently anticipate paying any cash dividends on its common stock. Consequently, the Company uses an expected dividend yield of zero in the options-pricing model. The Company also estimates option forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures significantly differ from those estimates. To determine an expected forfeiture rate, the Company uses historical experience as a proxy for forfeitures.

A summary of the Company's stock options and related activity as of and for the years ended December 31, 2012 and 2011 is presented below:

			Weighted Average Exercise Price			Aggregate Intrinsic Value

						(in thousands)
Options outstanding at January 1, 2011	747,400		$	7.99
Granted	—			—
Exercised	(15,000	)		4.69
Expired	—			—
Forfeited	(10,000	)		8.39

Options outstanding at January 1, 2012	722,400		$	8.06
Granted	—			—
Exercised	—			—
Expired	—			—
Forfeited	(7,500	)		7.90

Options outstanding at December 31, 2012	714,900		$	8.06	4.43	$	1,382

Options exercisable at December 31, 2011	589,900		$	8.31

Options exercisable at December 31, 2012	649,900		$	8.17	4.22	$	1,199

The total intrinsic value of stock options exercised during 2012 and 2011 was zero and $30,000, respectively. As of December 31, 2012, there was approximately $0.2 million of total unrecognized compensation cost related to unvested stock options. That cost is expected to be recognized over a weighted average period of .6 years.

A summary of the status and changes of FirstCity's non-vested stock option shares as of and for the year ended December 31, 2012 is presented below:

			Weighted- Average Grant-Date Fair Value

Non-vested at January 1, 2012	132,500		$	6.93
Granted	—		$	—
Vested	(66,250	)	$	6.93
Forfeited	(1,250	)	$	6.93

Non-vested at December 31, 2012	65,000		$	6.93

Restricted Stock Awards

In March 2011, the Company granted (i) 27,258 shares of restricted stock awards to non-employee directors that cliff-vest one year from the grant date; and (ii) 68,868 shares of restricted stock awards to executive management that time-vest over a three-year period. The weighted-average grant-date fair value of the awards was $6.58—which was based on the fair value of our common stock on the respective grant dates. In March 2012, the Company granted (i) 26,250 shares of restricted stock awards to non-employee directors that cliff-vest one year from the grant date; and (ii) 139,357 shares of restricted stock awards to executive management that time-vest over a three-year period. The weighted-average grant-date fair value of the awards was $8.78—which was based on the fair value of our common stock on the respective grant dates. Holders of the restricted stock awards have voting rights, and vesting of the grants is based on their continued service. Sales of the restricted stock are prohibited until the awards vest. As of December 31, 2012, there was approximately $1.1 million of total unrecognized compensation cost related to unvested restricted stock awards to be recognized over a weighted average period of 2.0 years.

A summary of the Company's restricted stock awards and related activity as of and for the year ended December 31, 2012 is presented below:



Shares outstanding at December 31, 2011	96,126
Shares granted	165,607
Shares vested	(50,212	)

Shares outstanding at December 31, 2012	211,521