NOTE 18. STOCK COMPENSATION PLANS

The Company recognized compensation expense for stock options in the amounts of $17,000 and $22,000 in 2014 and 2013, respectively. The Company granted 52,500 and 15,000 options to purchase common stock in 2014 and 2013, respectively.

Outside Directors’ Stock Option Plan

The Company had a non-qualified outside Directors’ Stock Option Plan (the “Directors’ Plan”) which expired in 2006. At December 31, 2014 all outstanding shares are fully vested (exercisable). The ability to grant new options under this plan has expired.

A summary of the Directors’ Plan activity is presented below:


	2014						2013
			Weighted	Weighted		(1)			Weighted
			Average	Average		Average			Average
			Exercise	Remaining		Intrinsic			Exercise
	Options		Price	Term (yrs)		Value	Options		Price
Options outstanding at beginning of year	25,670	$	22.00	1.5			58,306	$	21.15
Forfeited	(4,756)		21.81				(24,286)		21.24
Expired	(8,190)		22.38				(8,350)		18.27
Options outstanding at the end of the year	12,724	$	21.83	0.9	$	—	25,670	$	22.00
Options exercisable at the end of the year	12,724	$	21.83	0.9	$	—	25,670	$	22.00

(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 they exercised their options on December 31, 2014. The intrinsic value varies based on the changes in the market value in the Company’s stock. Because the exercise price exceeded the market value of the options, the average intrinsic value was $0 at December 31, 2014.

Information pertaining to options outstanding at December 31, 2014 is as follows:


					Options outstanding and exercisable
						Weighted		Weighted
						Average		Average
Range of					Number	Exercise		Remaining
exercise prices					Outstanding	Price		Term (yrs)
$	21.00	-	$	23.00	12,724	$	21.83	0.9
					12,724	$	21.83	0.9

2. Employee Stock Option and Appreciation Right Plan

The Company had a Stock Option and Appreciation Right Plan (the “Plan”) which expired in 2006. At December 31, 2014 all outstanding shares are fully vested (exercisable). The ability to grant new options under this plan has expired.

A summary of the Plan activity is presented below:


	2014						2013
			Weighted	Weighted		(1)			Weighted
			Average	Average		Average			Average
			Exercise	Remaining		Intrinsic			Exercise
	Options		Price	Term (yrs)		Value	Options		Price
Options outstanding at beginning of year	82,780	$	22.06	1.1			217,561	$	21.50
Forfeited	(13,309)		21.89				(119,137)		21.53
Expired	(33,859)		22.38				(15,644)		18.27
Options outstanding at the end of the year	35,612	$	21.82	1.0	$	—	82,780	$	22.06
Options exercisable at the end of the year	35,612	$	21.82	1.0	$	—	82,780	$	22.06

Information pertaining to options outstanding at December 31, 2014 is as follows:


					Options outstanding and exercisable
						Weighted		Weighted
						Average		Average
Range of					Number	Exercise		Remaining
exercise prices					Outstanding	Price		Term (yrs)
$	21.00	-	$	23.00	35,612	$	21.82	1.0
					35,612	$	21.82	1.0

Long-Term Incentive Plan

The 2007 Long-Term Incentive Plan (“LTI Plan”) was approved by Shareholders at the May 16, 2007 Annual Meeting. The LTI Plan consists of both a restricted and an unrestricted stock option plan. All employees and non-employee directors of the Company and its designated subsidiaries are eligible participants. The LTI Plan includes one million shares of Class A common stock, subject to customary anti-dilution adjustments, or approximately 4.0% of the total outstanding shares of the Class A common stock.

As of December 31, 2014, 869,291 shares in the unrestricted plan are available for future grants. The option price is equal to the fair market value at the date of the grant. The employee options are exercisable based on the grant’s vesting schedule beginning one year after the date of grant and must be exercised within ten years of the grant date. Directors’ options are exercisable on the one year anniversary of the date of grant and must be exercised within ten years of the grant date. During 2014 and 2013, the Company recognized $17,000 and $22,000, respectively, in compensation expense for stock options. Approximately, $53,000 remained to be recognized in compensation expense over a weighted-average period of 2.0 years.

The following assumptions were used to estimate the fair value of the options granted during 2014 and 2013:


	2014		2013
Weighted average risk-free interest rate	2.26	%	1.63	%
Weighted average volatility	85.29	%	94.00	%
Expected dividend yield	—	%	—	%
Weighted average expected life	5.0 years		5.0 years

A summary of the status of the unrestricted portion of the LTI Plan is presented below:


	2014						2013
			Weighted	Weighted		(1)			Weighted
			Average	Average		Average			Average
			Exercise	Remaining		Intrinsic			Exercise
	Options		Price	Term (yrs)		Value	Options		Price
Options outstanding at beginning of year	89,386	$	7.95	4.9			86,226	$	9.22
Granted	52,500		2.05				15,000		1.36
Forfeited	(11,177)		7.81				(11,840)		8.83
Options outstanding at the end of the year	130,709	$	5.60	6.4	$	—	89,386	$	7.95
Options exercisable at the end of the year	68,209	$	8.94	3.7	$	—	74,386	$	9.28

Weighted-average fair value of options granted during the year		$	1.39					$	0.98

(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 they exercised their options on December 31, 2014. The intrinsic value varies based on the changes in the market value in the Company’s stock. Because the exercise price exceeded the market value of the options, the average intrinsic value was $0 at December 31, 2014.

Information pertaining to options outstanding at December 31, 2014 is as follows:


					Options issued and outstanding
						Weighted		Weighted
						Average		Average
Range of					Number	Exercise		Remaining
exercise prices					Outstanding	Price		Term (yrs)
$	1.00	-	$	4.00	67,500	$	1.90	9.3
$	4.01	-	$	10.00	42,750		4.50	3.8
$	10.01	-	$	23.00	20,459		20.08	2.6
					130,709	$	5.60	6.4

The following table provides detail for non-vested shares under the LTI Plan as of December 31, 2014:


			Weighted
			Average
			Exercise
	Options		Price
Non-vested options December 31, 2013	15,000	$	1.36
Granted	52,500		2.05
Vested	(5,000)		1.36
Non-vested options December 31, 2014	62,500	$	1.94

Under the aforementioned LTI Plan, the Company is authorized to grant share-based incentive compensation awards for corporate performance to employees. These awards may be granted in form of shares of the Company’s common stock, performance-restricted restricted stock. The vesting of awards is contingent upon meeting certain return on asset and return on equity goals. The awards are not permitted to be transferred during the restricted time period from the date of the award and are subject to forfeiture to the extent that the performance restrictions are not satisfied. Awards are also forfeited if the employee terminates his or her service prior to the end of the restricted time period, unless such termination is in accordance with the Company’s mandatory retirement age. Vested awards are converted to shares of the Company’s common stock at the end of the restricted time period. The fair market value of each employee based award is estimated based on the fair market value of the Company’s common stock on the date of the grant and probable performance goals to be achieved and estimated forfeitures. If such goals are not met then no compensation cost would be recognized and any recognized compensation cost would be reversed. There were no shares of restricted stock outstanding at December 31, 2014.