Stock-based Compensation

3 Months Ended

Mar. 31, 2014

5. Stock-based Compensation

The Company has a stock incentive plan for the issuance of up to 442,750 shares of common stock. The plan provides for granting eligible participants stock options or other stock awards, as described by the plan, at option prices ranging from 85% to 110% of fair market value at date of grant. Options granted expire up to seven years after the date of grant. Such options generally become exercisable over a one to three year period. A total of 117,239 shares of common stock are reserved and available for additional grants of equity awards under the plan at March 31, 2014.

The Company charged compensation cost of approximately $2,600 against income for the three months ended March 31, 2014 and 2013. As of March 31, 2014, there was approximately $16,000 of unrecognized compensation cost related to unvested share-based compensation awards granted. That cost is expected to be recognized over the next three years.

The Company receives a tax deduction for certain stock option exercises during the period in which the options are exercised, generally for the excess of the market price at the time the stock options are exercised over the exercise price of the options, which increases the APIC pool, which is the amount that represents the pool of excess tax benefits available to absorb tax shortages. There were no excess tax benefits recognized during the three month periods ended March 31, 2014 and 2013. The Company’s APIC pool totaled approximately $111,000 at each of March 31, 2014 and December 31, 2013.

Proceeds from the exercise of stock options were approximately $13,000 for the three months ended March 31, 2014 and $41,000 for the three months ended March 31, 2013.

Stock option activity during the three months ended March 31, 2014 was as follows:

	Shares		Weighted Average Exercise Price
Outstanding at beginning of period	11,417		$	8.87
Exercised	(2,083	)	6.26
Forfeited	(1,666	)	7.77
Outstanding at March 31, 2014	7,668		9.82
Exercisable at March 31, 2014	2,083		6.87

The aggregate intrinsic value of all options outstanding and for those exercisable at March 31, 2014 was approximately $75,800 and $26,700, respectively.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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