Note 5 — Stock Options

On April 5, 2012, the Board of Directors adopted the 2012 International Bancshares Corporation Stock Option Plan (the “2012 Plan”). There are 800,000 shares available for stock option grants under the 2012 Plan. Under the 2012 Plan, both qualified incentive stock options (“ISOs”) and non-qualified stock options (“NQSOs”) may be granted. Options granted may be exercisable for a period of up to 10 years from the date of grant, excluding ISOs granted to 10% shareholders, which may be exercisable for a period of up to only five years. As of September 30, 2014, 211,500 shares were available for future grants under the 2012 Plan.

A summary of option activity under the stock option plans for the nine months ended September 30, 2014 is as follows:

	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value ($)
					(Dollars in Thousands)

Options outstanding at December 31, 2013	515,143	$	15.98
Plus: Options granted	549,750	21.42
Less:
Options exercised	30,392	13.36
Options expired	11,825	26.70
Options forfeited	19,775	18.60
Options outstanding at September 30, 2014	1,002,901	18.86		6.77	$	7,011

Options fully vested and exercisable at September 30, 2014	230,006	$	17.08	2.10	$	2,057

Stock-based compensation expense included in the consolidated statements of income for the three and nine months ended September 30, 2014 was approximately $301,000 and $766,000, respectively. Stock-based compensation expense included in the consolidated statements of income for the three and nine months ended September 30, 2013 was approximately $101,000 and $322,000, respectively. As of September 30, 2014, there was approximately $4,226,000 of total unrecognized stock-based compensation cost related to non-vested options granted under the Company plans that will be recognized over a weighted average period of 2.4 years.