Stock Option Plans

12 Months Ended

Dec. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Option Plans

11. Stock Option Plans

The Company grants stock options under the 2012 Employee Stock Option Plan (the “2012 Employee Plan”). The Company also has two plans under which the Company no longer grants options but under which certain options remain outstanding: the 2002 Employee stock Option Plan and the 2005 Non-Salaried Director Stock Option Plan (the “2005 Director Plan”).

The 2012 Employee Plan, which became effective April 23, 2012, provides for the issuance of incentive and nonqualified stock options at an exercise price equal to the fair market value of the Common Stock on the date the option is granted. The terms of the options granted are subject to the provisions of the 2012 Employee Plan. Options granted under the 2012 Employee Plan vest 25% one day after the first anniversary of the grant date and 25% one day after each of the next three anniversaries. As of December 31, 2016, the number of shares available for grant under the 2012 Employee Plan was 66,850. Under the terms of the Employee Plan, no option may be granted under that plan after the tenth anniversary of the adoption of the plan. Options outstanding under the Company’s 2002 Employee Stock Option Plan have the same vesting schedule as the 2012 Employee Plan.

The 2005 Director Plan, as amended, provided for the issuance of stock options for up to a total of 180,000 shares of the Company's common stock to non-salaried directors. Under the Director Plan, Directors elected on April 25, 2005 and at subsequent Annual Meetings who have not received any prior grant under this or previous plans received an initial grant of an option to purchase 5,000 shares of Common Stock (the “Initial Option”). Each year, each elected Director not receiving an Initial Option received a 5,000 share option (the “Annual Option”). The Initial Option vests 25% on the date of grant and 25% on the anniversary of the grant date in each of the following 3 years. Each Annual Option becomes fully exercisable one day after the date of grant. The exercise price of each option granted equals the fair market value of the Common Stock on the date the option is granted, and expires ten (10) years from the date of grant. As provided in the Director Plan, no options may be granted under the Director Plan after the tenth anniversary of the adoption of the Plan, i.e., after April 25, 2015.

The Company has amended certain of its stock option plans for both employees and directors to permit options to be exercised on a net basis and receive either cash or shares of the Company’s Common Stock. Specifically, optionees may, at the time of exercise of an option and subject to the consent of the Company, elect either (i) to receive from the Company cash in an amount equal to the number of shares of Common Stock subject to the option (or portion thereof) that is being exercised multiplied by the excess of (a) the fair market value per share over (b) the exercise price per share of the option ( a “net cash settlement”); or (ii) to make payment of the exercise price of the option by reduction in the number of shares of Common Stock otherwise deliverable upon exercise of such option by the number of shares having an aggregate fair market value equal to the total exercise price of the option (or portion thereof). In 2016, the Company paid a total of approximately $2,274,000 to optionees who had elected a net cash settlement of their respective options.

A summary of changes in options issued under the Company’s stock option plans follows:

	2016			2015
Options outstanding  at the
beginning of the year		1,267,802			1,357,813
Options granted		171,000			47,000
Options forfeited		(33,825	)		(39,375	)
Options exercised		(316,699	)		(97,636	)
Options outstanding at
the end of the year		1,088,278			1,267,802
Options exercisable at the
end of the year		769,403			970,017
Common stock available for future grants at the end of the year		66,850			201,350
Weighted average exercise price per share:
Granted	$	21.41		$	18.90
Forfeited		15.03			15.65
Exercised		10.99			12.79
Outstanding		14.18			12.46
Exercisable		12.29			11.72

A summary of options outstanding at December 31, 2016 is as follows:

		Options Outstanding		Options Exercisable
Range of Exercise Prices	Number Outstanding	Weighted- Average Remaining Contractual Life (Years)	Weighted- Average Exercise Price	Number Exercisable	Weighted- Average Exercise Price
$7.30 to $10.10	214,038	4	$                  9.49	214,038	$                9.49
$10.11 to $12.14	221,865	5	10.85	212,490	10.80
$12.15 to $14.68	218,000	5	13.49	182,000	13.44
$14.69 to $16.98	216,375	6	16.35	134,125	16.20
$16.99 to $21.49	218,000	9	20.84	26,750	19.09
	1,088,278			769,403

The weighted average remaining contractual life of all outstanding stock options is 6 years.

Stock Based Compensation

Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which is generally the vesting period. The Company uses the Black-Scholes option pricing model to determine the fair value of employee and non-employee director stock options. The determination of the fair value of stock-based payment awards on the date of grant, using an option-pricing model, is affected by the Company’s stock price as well as assumptions regarding a number of complex and subjective variables. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them (“expected term”), the estimated volatility of the Company’s Common Stock price over the expected term (“volatility”) and the number of options that will not fully vest in accordance with applicable vesting requirements (“forfeitures”).

The Company estimates the expected term of options granted by evaluating various factors, including the vesting period, historical employee information, as well as current and historical stock prices and market conditions. The Company estimates the volatility of its common stock by calculating historical volatility based on the closing stock price on the last day of each of the 60 months leading up to the month the option was granted. The risk-free interest rate that the Company uses in the option valuation model is the interest rate on U.S. Treasury zero-coupon bond issues with remaining terms similar to the expected term of the options granted. Historical information was the basis for calculating the dividend yield. The Company is required to estimate forfeitures at the time of grant and to revise those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company used a mix of historical data and future assumptions to estimate pre-vesting option forfeitures and to record stock-based compensation expense only for those awards that are expected to vest. All stock-based payment awards are amortized over the requisite service periods of the awards, which are generally the vesting periods.

The assumptions used to value option grants for the twelve months ended December 31, 2016 and December 31, 2015 were as follows:

	2016		2015
Expected life in years		5		5
Interest rate		1.07 – 1.24%		1.33 – 1.62%
Volatility		.236-.258		.234-.252
Dividend yield		1.6% - 2.0%		1.95% - 2.10%

Total stock-based compensation recognized in the Company’s consolidated statements of operations for the years ended December 31, 2016 and 2015 was $440,536 and $513,986, respectively. At December 31, 2016, there was approximately $867,624 of unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested stock-based payments granted to the Company’s employees. As of December 31, 2016, the remaining unamortized expense is expected to be recognized over a weighted average period of 3 years.

The weighted average fair value at the date of grant for options granted during 2016 and 2015 was $4.05 and $3.44 per option, respectively. The aggregate intrinsic value of outstanding options was $12,395,486 at December 31, 2016. The aggregate intrinsic value of exercisable options was $10,271,617 at December 31, 2016. The aggregate intrinsic value of options exercised during 2016 was $4,633,306.