(11)	Stock Option and Equity Incentive Plans

Incentive Plan

June

2003,

the Company formally adopted the

2003

Incentive Plan (the “Plan”). The Plan was originally intended to benefit the Company by offering equity-based incentives to certain of the Company’s executives and employees, thereby giving them a permanent stake in the growth and long-term success of the Company and encouraging the continuance of their involvement with the Company’s businesses. The Plan was amended effective

June

2008,

to permit certain performance-based cash awards to be made under the Plan. The Plan was further amended on

June

2011,

to increase the maximum number of shares of common stock in the aggregate to be issued to

2,250,000.

The amendment also added appropriate language so as to enable grants of stock-based awards under the Plan to continue to be eligible for exclusion from the

$1,000,000

limitation on deductibility under Section

162(m)

of the Internal Revenue Code (the “Code”). The Plan was further amended on

March

2013,

to (i) prohibit the repricing of stock options or other equity awards without the consent of the Company’s shareholders, and (ii) prohibit the Company from buying out underwater stock options.

Two

types of equity awards

may

be granted to participants under the Plan: restricted shares or other stock awards. Restricted shares are shares of common stock awarded subject to restrictions and to possible forfeiture upon the occurrence of specified events. Other stock awards are awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, shares of common stock. Such awards

may

include Restricted Stock Unit Awards (“RSUs”), unrestricted or restricted stock, incentive and non-qualified stock options, performance shares, or stock appreciation rights. The Company determines the form, terms, and conditions, if any, of any awards made under the Plan.

Through

December

31,

2016,

1,197,034

shares of common stock have been issued under the

2003

Incentive Plan, none of which have been restricted. An additional

46,065

shares are being reserved for outstanding grants of RSUs and other share-based compensation that are subject to various performance and time-vesting contingencies. The Company has also granted awards in the form of stock options under this Plan. Through

December

31,

2016,

170,000

options have been granted and

83,125

options are outstanding. At

December

31,

2016,

936,182

shares or options are available for future issuance in the

2003

Incentive Plan.

Director Plan

Effective

July

15,

1998,

the Company adopted the

1998

Director Plan, which was amended and renamed, on

June

2009,

the

2009

Non-Employee Director Stock Incentive Plan (the “Director Plan”). The Director Plan was amended on

March

2013,

to (i) prohibit the repricing of stock options or other equity awards without the consent of the Company’s shareholders, and (ii) prohibit the Company from buying out underwater stock options. The Director Plan, as amended, provides for the issuance of stock options and other equity-based securities of up to

975,000

shares to non-employee members of the Company’s board of directors. Through

December

31,

2016,

325,810

options have been granted and

149,453

options are outstanding. For the year ended

December

31,

2016,

4,764

shares of common stock were issued and

131,554

shares remained available to be issued under the Director Plan.

The following is a summary of stock option activity under all plans:

	Shares Under Options			Weighted Average Exercise Price (per share)		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value (in thousands)

Outstanding December 31, 2015		270,205		$	15.40
Granted		17,184			22.02
Exercised		(54,811	)		24.57
Outstanding December 31, 2016		232,578		$	16.53		3.66	$	2,074
Exercisable at December 31, 2016		210,078		$	16.02		3.86	$	1,981
Vested and expected to vest at December 31, 2016		232,578		$	16.53		3.66	$	2,074

During the years ended

December

31,

2016,

2015

and

2014,

the total intrinsic value of all options exercised (i.e., the difference between the market price and the price paid by the employees to exercise the options) was approximately

$0.7

million,

$1.3

million, and

$3.4

million, respectively, and the total amount of consideration received from the exercise of these options was approximately

$695,000,

$394,000,

and

$709,000,

respectively. At its discretion, the Company allows option holders to surrender previously owned common stock in lieu of paying the exercise price and withholding taxes. During the year ended

December

31,

2016,

6,514

(6,514

for options and

zero

for taxes) were surrendered at an average market price of

$25.50.

During the year ended

December

31,

2015,

1,632

(1,632

for options and

zero

for taxes) were surrendered at an average market price of

$21.97.

During the year ended

December

31,

2014,

32,164

(14,931

for options and

17,233

for taxes) were surrendered at an average market price of

$25.42.

During the years ended

December

31,

2016,

2015

and

2014,

the Company recognized compensation expense related to stock options granted to directors and employees of approximately

$238,000,

$282,000,

and

$354,000,

respectively.

February

22,

2016,

the Company’s Compensation Committee approved the award of

$400,000

payable in shares of the Company’s common stock to the Company’s Chairman, Chief Executive Officer, and President under the

2003

Equity Incentive Plan. The shares were issued on

December

28,

2016.

The Company has recorded compensation expense of

$400,000

for the year ended

December

31,

2016.

Stock compensation expense of

$400,000

was also recorded in both

2015

and

2014

for similar awards.

June

2016,

the Company issued

4,764

shares of unrestricted common stock to the non-employee members of the Company’s Board of Directors as part of their annual retainer for serving on the Board. Based upon the closing price of

$22.02

June

2016,

the Company recorded compensation expense of approximately

$105,000

associated with the stock issuance for the year ended

December

31,

2016.

The Company recorded compensation expense of approximately

$105,000

and

$122,000

for similar awards in

2015

and

2014,

respectively.

The Company grants RSUs to its executive officers. The stock unit awards are subject to various time-based vesting requirements, and certain portions of these awards are subject to performance criteria of the Company. Compensation expense on these awards is recorded based on the fair value of the award at the date of grant, which is equal to the Company’s closing stock price, and is charged, to expense ratably during the service period. No compensation expense is taken on awards that do not become vested, and the amount of compensation expense recorded is adjusted based on management’s determination of the probability that these awards will become vested. The following table summarizes information about stock unit award activity during the year ended

December

31,

2016:

	Restricted Stock Units			Weighted Average Award Date Fair Value
Outstanding at December 31, 2015		40,645		$	19.67
Awarded		17,822			21.66
Shares vested		(11,909	)		20.94
Outstanding at December 31, 2016		46,558		$	20.05

The Company recorded approximately

$314,000,

$274,000

and

$237,000

in compensation expense related to these RSUs during the years ended

December

31,

2016,

2015

and

2014,

respectively

At the Company’s discretion, RSU holders are given the option to net-share settle to cover the required minimum withholding tax, and the remaining amount is converted into the equivalent number of common shares. During the year ended

December

31,

2016,

3,389

shares were redeemed for this purpose at an average market price of

$22.82.

During the years ended

December

31,

2015

and

2014,

3,405

and

9,878

shares were redeemed for this purpose at an average market price of

$23.15

and

$25.88,

respectively.

The following summarizes the future share-based compensation expense the Company will record as the equity securities granted through

December

31,

2016,

vest (in thousands):

	Options		Common Stock		Restricted Stock Units		Total
2017		44		-		293		337
2018		16		-		207		223
2019		-		-		110		110
2020		-		-		23		23
Total	$	60	$	-	$	633	$	693

Tax benefits totaling approximately

$145,000,

$356,000,

and

$1,219,000

were recognized as additional paid-in capital during the years ended

December

31,

2016,

2015

and

2014,

respectively, since the Company’s tax deductions exceeded the share-based compensation charge recognized for stock options exercised and RSUs vested.