NOTE 7 – STOCK-BASED COMPENSATION

The Company has three stock-based compensation plans (the “Plans”), as described below. Total compensation cost that has been charged against income for those Plans totaled $35 and $74, respectively, for the three months ended March 31, 2015 and 2014. The total income tax effect was not material for the three months ended March 31, 2015 and 2014.

The Plans, which are stockholder-approved, provide for stock option grants and restricted stock awards to directors, officers and employees. The 1999 Stock-Based Incentive Plan, which expired July 13, 2009, provided 38,778 shares of common stock for stock option grants and 15,511 shares of common stock for restricted stock awards. The 2003 Equity Compensation Plan (the “2003 Plan”), as amended and restated, provided an aggregate of 100,000 shares for stock option grants and restricted stock awards, of which up to 30,000 shares could be awarded in the form of restricted stock awards. The 2009 Equity Compensation Plan, which was approved by stockholders on May 21, 2009, replaced the 2003 Plan and provides 200,000 shares, plus any remaining shares available to grant or that are later forfeited or expire under the 2003 Plan, that may be issued as stock option grants, stock appreciation rights or restricted stock awards. On May 16, 2013, stockholders approved the First Amendment to the 2009 Equity Compensation Plan to increase the number of shares of common stock reserved for stock option grants and restricted stock awards thereunder to 1,500,000.

Stock Options

The Plans permit the grant of stock options to directors, officers and employees of the Holding Company and CFBank. Option awards are granted with an exercise price equal to the market price of the Company’s common stock on the date of grant, generally have vesting periods ranging from one to three years, and are exercisable for ten years from the date of grant. Unvested stock options immediately vest upon a change of control.

The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below. Expected volatilities are based on historical volatilities of the Company’s common stock. The Company uses historical data to estimate option exercise and post-vesting termination behavior. Employee and management options are tracked separately. The expected term of options granted is based on historical data and represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

There were no options granted or exercised during the three months ended March 31, 2015 and March 31, 2014.

A summary of stock option activity in the Plans for the three months ended March 31, 2015 follows:



	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Intrinsic Value

Outstanding at beginning of year	621,396	$	1.56
Granted	-		-
Exercised	-		-
Expired	-		-
Cancelled or Forfeited	-		-
Outstanding at end of period	621,396	$	1.56	8.2	$	-

Expected to vest	333,331	$	1.40	8.3	$	-

Exercisable at end of period	288,065	$	1.74	8.0	$	-

During the three months ended March 31, 2015 there were no stock options canceled or forfeited. During the three months ended March 31, 2014, there were 7,560 stock options canceled or forfeited. Previously recognized expense associated with nonvested forfeited shares was reversed.

As of March 31, 2015, there was $108 of total unrecognized compensation cost related to nonvested stock options granted under the Plans. The cost is expected to be recognized over a weighted-average period of 1.1 years. Substantially all of the 333,331 nonvested stock options at March 31, 2015 are expected to vest.

Restricted Stock Awards

The Plans permit the grant of restricted stock awards to directors, officers and employees. Compensation is recognized over the vesting period of the awards based on the fair value of the stock at grant date. The fair value of the stock was determined using the closing share price on the date of grant and shares generally have vesting periods of one to three years. There were 953,642 shares available for stock option grants and restricted stock to be issued under the Plans at March 31, 2015. There were no shares of restricted stock issued during the three months ended March 31, 2015 and 2014. As of March 31, 2015, there were no nonvested restricted share awards.

There were no shares of restricted stock forfeited during the three months ended March 31, 2015 and 2014. Also, there were no shares vested during the three months ended March 31, 2015 and 2014.