Note 12 – Stock-Based Compensation

The Company issues stock-based compensation awards to its directors and employees under the 2008 Long-Term Incentive Plan ("2008 LTIP"). The 2008 LTIP permits the grant of non-qualified and incentive stock options, stock appreciation rights, full value awards and cash incentive awards for up to 2,000,000 shares of common stock. As of December 31, 2017, there were 1,312,015 shares available for future awards under the 2008 LTIP.

No stock options were granted during the year ended December 31, 2017, compared to 450,000 stock options granted to senior executive officers under the 2008 LTIP during the year ended December 31, 2016. These options have an exercise price of $1.62 per share, vest over five years and expire ten years from the grant date. The Company estimated the compensation costs and fair value per share of these stock options to be $194 thousand and $0.43 per share, respectively, using the Black-Scholes option pricing model and the following assumptions: (i) expected volatility of 27.36%; (ii) risk free interest rate of 1.21%; (iii) expected option term of five years; and (iv) 0% dividend yield.

The following table summarizes stock option activity during the years ended December 31, 2017 and 2016:

	2017					2016
	Number Outstanding			Weighted Average Exercise Price		Number Outstanding		Weighted Average Exercise Price
Outstanding at beginning of year		540,625		$	2.18		90,625	$	4.95
Granted during the year		-			-		450,000		1.62
Exercised during the year		-			-		-		-
Forfeited or expired during the year		(3,125	)		4.80		-		-

Outstanding at end of year		537,500		$	2.19		540,625	$	2.18


Exercisable at end of year		177,500		$	3.26		90,625	$	4.95

The Company recorded $39 thousand and $32 thousand of stock-based compensation expense related to stock options during 2017 and 2016, respectively. As of December 31, 2017, unrecognized compensation cost related to nonvested stock options granted under the plan was $123 thousand. The cost is expected to be recognized over a period of 3.15 years.

Options outstanding and exercisable at year-end 2017 were as follows:

	Outstanding								Exercisable
Grant Date	Number Outstanding		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Aggregate Intrinsic Value		Number Outstanding		Weighted Average Exercise Price		Aggregate Intrinsic Value
January 21, 2009		7,500		1.05 years	$	4.00				7,500	$	4.00
March 18, 2009		75,000		1.21 years	$	4.98				75,000	$	4.98
January 21, 2010		5,000		2.05 years	$	6.00				5,000	$	6.00
February 24, 2016		450,000		8.15 years	$	1.62				90,000	$	1.62

		537,500		6.98 years	$	2.19	$	333,000		177,500	$	3.26	$	67,000

In March 2016, the Company awarded 120,483 shares of restricted stock to its Chief Executive Officer ("CEO") under the 2008 LTIP. A restricted stock award is valued at the closing price of the Company's stock on the date of such award. Subject to certain performance restrictions, 100,000 shares of restricted stock shall vest over a two-year period and the remaining 20,483 shares shall vest over a three-year period. Stock-based compensation expense is recognized on a straight-line basis over the vesting period. The Company recorded $105 thousand and $79 thousand of stock-based compensation expense related to this award during the years ended December 31, 2017 and 2016, respectively. As of December 31, 2017, unrecognized compensation cost related to non-vested restricted stock award was $39 thousand, of which $23 thousand is expected to be recognized over a period of three months and $16 thousand is expected to be recognized over a period of 15 months.

In April 2017, the Company awarded 30,002 shares of common stock to its directors under the 2008 LTIP, all of which are fully vested. The Company recorded $53 thousand of compensation expense based on the fair value of the stock, which was determined using the average of the high and the low price of the stock on the date of the award.

In April 2017, the Company also awarded 129,270 of cash-settled restricted stock units ("RSUs") to its CEO under the 2008 LTIP. All RSUs vest at the end of two years from the date of the grant and are subject to forfeiture until vested. Each RSU entitles the CEO to receive cash equal to the fair market value of one share of common stock on the applicable payout date. Compensation expense is determined based on the fair value of the award and is re-measured at each reporting period and is classified as a liability in the statements of financial condition. The Company recorded $102 thousand of compensation expense related to this award during the year ended December 31, 2017.