13.

Compensation Plans

In April 2007, the Company adopted and the shareholders approved the 2007 Stock Incentive Plan (the “2007 SIP”) under which employees, independent contractors, and non-employee directors may be granted stock options, restricted stock, deferred stock awards, restricted stock units (“RSU's”), and stock appreciation rights, any of which may or may not require the achievement of performance objectives. Vesting requirements are determined by the Compensation Committee of the Board of Directors. The Company reserved 2,550,000 shares for issuance under the 2007 SIP. At December 31, 2014, an aggregate of 628,000 shares remain available for grant under the 2007 SIP.

Compensation expense related to stock options is recognized based on the grant-date fair value of the awards estimated using the Black-Scholes option pricing model. Compensation expense related to deferred stock, restricted stock, and restricted stock units is recognized based on the grant-date fair value of the Company's common stock. The total stock-based compensation cost included in the Statements of Income was $5.6 million, $5.3 million, and $4.7 million in 2014, 2013, and 2012, respectively.

Stock Options

There were no stock options granted in 2014 and 2013. In 2012, 9,830 stock options were granted as an equitable adjustment in conjunction with the special dividend declared in the fourth quarter of 2012. For purposes of determining the fair value of stock option awards granted, the Company used the Black-Scholes option pricing model and the assumptions set forth in the table below.

	2012
Dividend yield		2.9	%
Expected volatility		44.2	%
Risk free rate of return		4.0	%
Expected lives		2.9 years

The estimated fair value of options granted is subject to the assumptions made and if the assumptions changed, the estimated fair value amounts could be significantly different.

The following table summarizes the stock option activity of the Plans:

	Shares			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Life (Years)
Outstanding at December 31, 2011		328,700			8.58		4.42		6.2
Granted		9,830			8.59		32.57		5.6
Exercised		(217,820	)		7.92		4.40		4.8
Canceled		(250	)		8.69		4.57		6.3
Outstanding at December 31, 2012		120,460			8.58		6.76		5.7
Granted		-			-		-		-
Exercised		(63,239	)		8.51		6.86		4.4
Canceled		-			-		-		-
Outstanding at December 31, 2013		57,221			8.66		6.65		5.0
Granted		-			-		-		-
Exercised		(16,244	)		8.25		7.54		3.9
Canceled		-			-		-		-
Outstanding at December 31, 2014		40,977			8.82		6.29		4.1
Exercisable Options Outstanding at December 31, 2014		40,977			8.82		6.29		4.1
Non-Vested Options Outstanding at December 31, 2014		-			-		-		-

At December 31, 2014, the aggregate intrinsic value of all options, including exercisable options, was $1.1 million.

Deferred Stock

Deferred stock awards vest based on the passage of time or the Company's attainment of performance objectives. Upon vesting, these awards convert one-for-one to common stock.

In 2014, 3,711 deferred stock awards were issued to non-employee directors that will vest in April 2015 and 7,002 deferred stock awards were issued to non-employee directors that will vest in April 2017.

In 2013, 4,430 deferred stock awards were issued to non-employee directors that will vest in April 2014 and 5,952 deferred stock awards were issued to non-employee directors that will vest in April 2016.

In 2012, 4,542 deferred stock awards were issued to non-employee directors that will vest in April 2013 and 6,102 deferred stock awards were issued to non-employee directors that will vest in April 2015.

Compensation expense related to these awards is amortized ratably over the vesting period. Compensation expense related to these awards was $0.6 million, $0.5 million and $0.5 million in 2014, 2013, and 2012, respectively.

At December 31, 2014, there was $0.6 million of unrecognized compensation cost related to deferred stock that is expected to be recognized over a period of three years.

Restricted Stock Units

Beginning in the second quarter of 2009, the Company began granting restricted stock units in lieu of incentive stock options to senior employees. These RSU's have a vesting “double trigger.” The vesting of these RSU's is dependent on the achievement of corporate objectives established by the Compensation Committee of the Board of Directors and the passage of time.

During 2014, 59,000 restricted stock units were issued. Compensation costs related to these restricted stock units was $3.8 million, of which $1.0 million was recognized in 2014. The remaining costs will be recognized ratably over the remaining period required before the units vest, which is 27 months.

During 2013, 32,000 restricted stock units were issued. Compensation costs related to these restricted stock units was $1.8 million, of which $0.6 and $0.5 million was recognized in 2014 and 2013, respectively. The remaining costs will be recognized ratably over the remaining period required before the units vest, which is 15 months.

During 2012, 139,000 restricted stock units were issued. Compensation costs related to these restricted stock units was $6.2 million, of which $1.5 million, $1.5 million and $1.2 million was recognized in 2014, 2013 and 2012, respectively. The remaining costs will be recognized ratably over the remaining period required before the units vest, which ranges from one to two years.

At December 31, 2014, there was $7.2 million of unrecognized compensation cost related to restricted stock units that is expected to be recognized over a period of 2.3 years.