Stock-Based Compensation

3 Months Ended

Mar. 31, 2017

Stock-Based Compensation

Note 10: Stock-Based Compensation

On June 28, 2013, the Company registered with the SEC a stock-based compensation plan, which superseded all other plans. There are 317,209 shares available for grant under this plan at March 31, 2017.

Stock-based compensation expense related to stock awards for the three month periods ended March 31, 2017 and 2016 was $59 thousand and $16 thousand, respectively. Compensation expense for stock options is the estimated fair value of options on the date granted using the Black-Scholes Model amortized on a straight-line basis over the vesting period of the award. There was no unrecognized compensation expense related to stock options as of March 31, 2017.

Options for a total of 8,500 shares were granted and vested during the three months ended March 31, 2017. The aggregate fair value of options granted during the three months ended March 31, 2017 was $16 thousand. Options for a total of 7,500 shares were granted and vested during the three months ended March 31, 2016. The aggregate fair value of options granted during the three months ended March 31, 2016 was $16 thousand.

The variables used in these calculations of the fair value of the options are as follows:

	For the three months ended March 31,
	2017			2016
Risk free interest rate (5 year Treasury)		1.93	%		1.49	%
Expected dividend yield		0	%		0	%
Expected term (years)		5			5
Expected volatility		21.7	%		40.1	%

Stock option activity for the three months ended March 31, 2017 is summarized below:

						Weighted
						Average
				Weighted Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Shares			Price		Life (in years)		Value (1)
Options outstanding, January 1, 2017		218,300		$	6.35		5.9
Granted		8,500			8.30
Forfeited		(1,195	)		8.43
Exercised		—			—
Expired		—			—
Options outstanding and exercisable, March 31, 2017		225,605		$	6.41		5.9	$	737,512

(1) The aggregate intrinsic value of a stock option in the table above represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) that would have been received by the option holders had all option holders exercised their options on March 31, 2017. This amount changes based on changes in the market value of the Company’s common stock.

In the first quarter of 2017, 12,500 shares of restricted stock were granted to two executives. Of these shares, 5,000 shares vested immediately and $43 thousand of compensation expense was recorded. Another 2,500 shares of restricted stock will vest over two years and $20 thousand of compensation expense is expected to be recorded over that period. The final 5,000 shares of restricted stock will vest over three years and $40 thousand of compensation expense is expected to be recorded over that period.