NOTE 7 – STOCK-BASED COMPENSATION

The Company has issued awards under three stock-based compensation plans (the “Plans”), as described below. Total compensation cost that has been charged against income for those Plans totaled $33 and $92, respectively, for the three and nine months ended September 30, 2016 and $31 and $102, respectively, for the three and nine months ended September 30, 2015. The total income tax effect was $9 and $26, respectively, for the three and nine months ended September 30, 2016, and $2 and $6, respectively, for the three and nine months ended September 30, 2015.

The Plans are all stockholder-approved and authorize stock option grants and restricted stock awards to be made 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 (the “2009 Plan”), which was approved by stockholders on May 21, 2009, replaced the 2003 Plan and provided for 200,000 shares, plus any remaining shares available to grant or that are later forfeited or expire under the 2003 Plan, to be made available to be issued as stock option grants, stock appreciation rights or restricted stock awards. On May 16, 2013, the Company’s stockholders approved the First Amendment to the 2009 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 and nine months ended September 30, 2016 and September 30, 2015 (unaudited).

A summary of stock option activity in the Plans for the nine months ended September 30, 2016 follows (unaudited):



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

Outstanding at beginning of year	566,696	$	1.48
Granted	-		-
Exercised	-		-
Expired	-		-
Cancelled or Forfeited	(23,950)		2.01
Outstanding at end of period	542,746	$	1.46	6.7	$	-

Expected to vest	85,669	$	1.43	7.0	$	-

Exercisable at end of period	457,077	$	1.46	6.6	$	-

During the nine months ended September 30, 2016, there were 23,950 stock options canceled or forfeited. During the nine months ended September 30, 2015, there were 7,867 stock options canceled or forfeited. Previously recognized expense associated with forfeited stock options was reversed.

As of September 30, 2016, there was $1 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 0.1 years. Substantially all of the 85,669 nonvested stock options at September 30, 2016 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 is determined using the closing share price on the date of grant and shares generally have vesting periods of one to three years. There were no shares of restricted stock issued during the three and nine months ended September 30, 2016 and 2015 (unaudited).

A summary of changes in the Company’s nonvested restricted shares for the year follows (unaudited):


Nonvested Shares	Shares	Weighted Average Grant- Date Fair Value
Nonvested at January 1, 2016	200,500	$	1.37
Granted	-		-
Vested	-		-
Forfeited	-		-
Nonvested at September 30, 2016	200,500	$	1.37

As of September 30, 2016 and 2015, the unrecognized compensation cost related to nonvested restricted stock awards granted under the Plans was $191 and $0, respectively. There were no shares of restricted stock forfeited during the three and nine months ended September 30, 2016 and 2015. Also, there were no shares that vested during the three and nine months ended September 30, 2016 and 2015.

There were 831,792 shares remaining available for stock option grants and restricted stock awards under the 2009 Plan at September 30, 2016.