STOCK-BASED COMPENSATION PLANS

3 Months Ended

Mar. 31, 2017

STOCK-BASED COMPENSATION PLANS [Abstract]

STOCK-BASED COMPENSATION PLANS

(5) STOCK-BASED COMPENSATION PLANS

The Company’s 2005 Equity Incentive Plan, as amended (“2005 Plan”), terminated in March 2015.  The 2005 Plan provided for the grant of incentive stock options, restricted stock, restricted stock units and stock grants to eligible employees (including officers and employee-directors) and non-statutory stock options to eligible employees, directors and consultants.  As of March 31, 2017, there were 338,415 vested options and 56,251 unvested options granted under the 2005 Plan that remained outstanding in accordance with their terms and there were no shares available for issuance under the 2005 Plan due to its termination.

The Company’s shareholders approved the 2015 Equity Incentive Plan (“2015 Plan”) in June 2015.  The 2015 Plan replaces the 2005 Plan.  The maximum number of shares of Common Stock that may be delivered to participants and their beneficiaries under the 2015 Plan is 200,000.  The 2015 Plan provides for the grant of incentive stock options, stock appreciation right awards, restricted stock awards, stock unit awards and other stock-based awards to eligible recipients.  The objectives of the 2015 Plan are to attract and retain the best possible candidates for positions of responsibility and provide for additional performance incentives by providing eligible employees with the opportunity to acquire equity in the Company.  The 2015 Plan is administered by a committee of two or more outside directors from the Company’s Board of Directors (the “Committee”). The Committee determines the eligible individuals to whom awards under the 2015 Plan may be granted, as well as the time or times at which awards will be granted, the number of shares subject to awards to be granted to any eligible individual, the term of the award, vesting terms and conditions and any other terms and conditions of the grant in addition to those contained in the 2015 Plan.  Each grant under the 2015 Plan will be confirmed by and subject to the terms of an award agreement.  As of March 31, 2017, there were 16,750 vested options and 89,250 unvested options granted under the 2015 Plan and 94,000 shares available for issuance under the 2015 Plan.

The Company uses the Black-Scholes option-pricing model to estimate the fair value of each option granted with the following weighted average assumptions:

	Quarters Ended March 31,
Valuation Assumptions	2016			2017
Expected life (1)		3.3			4.0
Risk-free interest rate (2)		1.21	%		1.85	%
Expected volatility (3)		39	%		51	%
Expected dividend yield		7.81	%		0.00	%
Expected forfeiture (4)		27.00	%		30.00	%

⁽¹⁾ The expected life, in years, of stock options is estimated based on historical experience.

⁽²⁾ The risk-free interest rate is based on U.S. Treasury bills whose term is consistent with the expected life of the stock options.

⁽³⁾ The expected volatility is estimated based on historical and current stock price data for the Company.

⁽⁴⁾ Forfeitures are estimated based on historical experience.

A summary of option activity as of March 31, 2017, and changes during the quarter then ended, is presented below:

	Number of Options		Weighted- Average Exercise Price		Range of Exercise Prices		Weighted- Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (thousands)
Outstanding at January 1, 2017		465,666	$	15.94	$	10.04 - $19.75		3.6	$	654
Granted		35,000	$	12.56	$	12.25 - $14.45
Outstanding at March 31, 2017		500,666	$	15.70	$	10.04 - $19.75		3.6	$	254
Exercisable at March 31, 2017		355,165	$	17.00	$	10.04 - $19.75		2.8	$	66

The weighted average grant date fair values of options granted were $5.20 per share and $1.74 per share during the quarters ended March 31, 2017 and 2016, respectively.  As of March 31, 2017, there was approximately $234,000 of total unrecognized compensation expense related to non-vested stock options, which is expected to be recognized over a weighted average period of 3.29 years.