STOCK COMPENSATION

The Company accounts for stock compensation using ASC 718 Compensation – Stock Compensation. The Company recorded stock compensation of $5.4 million, $4.8 million and $4.1 million in 2014, 2013 and 2012, respectively. Options to the Board of Directors vest immediately and options to employees vest over three years. All options expire 10 years from the grant date. The restricted stock awards vest over four years.

2005 Equity Incentive Plan

The Company adopted the 2005 Equity Incentive Plan to provide stock compensation as a means of attracting and retaining qualified independent directors and employees for the Company. A total of 1.7 million shares are available for future issuance under the equity incentive plan. The exercise price of stock options may not be less than the fair market value of the common stock on the date of the grant. The vesting and term of each option is set by the Board of Directors. The Company granted 59,000 stock options under this plan in 2014, 60,000 stock options under this plan in 2013, and 45,000 stock options under this plan in 2012. The Company granted 10,000 restricted stock awards under this plan in 2014, 225,750 restricted stock awards under this plan in 2013, and 293,000 restricted stock awards under this plan in 2012.

Stock Options

The following is a summary of activity in stock options for 2014:



	Shares Subject to Option		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in Years)	Aggregate Intrinsic Value (in thousands)
Outstanding, December 31, 2013	1,154,069		$	18.18
Granted	59,000		16.37
Exercised	(8,971	)	15.75
Forfeited/Expired	(26,025	)	18.93
Outstanding, December 31, 2014	1,178,073		18.09		5.03	$	—
Exercisable, December 31, 2014	1,178,073		18.09		5.03	$	—

The total intrinsic value of options exercised in 2014 was $0.0 million. Cash received from the exercise of stock options was $0.1 million for 2014. Tax benefit realized for the tax deductions from stock options exercised was $0.0 million for 2014. The weighted-average per share estimated grant date fair value of options issued in 2014 was $9.97. The Company has no pre-tax unrecognized compensation expense for stock options at December 31, 2014.

The total intrinsic value of options exercised in 2013 was $0.4 million. Cash received from the exercise of stock options was $1.0 million for 2013. Tax benefit realized for the tax deductions from stock options exercised was $0.2 million in 2013. The weighted-average per share estimated grant date fair value of options issued in 2013 was $14.51.

The total intrinsic value of options exercised in 2012 was $1.0 million. Cash received from the exercise of stock options was $0.9 million for 2012. Tax benefit realized for the tax deductions from stock options exercised was $0.4 million in 2012. The weighted-average per share estimated grant date fair value of options issued in 2012 was $13.39.

The Company currently uses treasury shares to satisfy any stock option exercises. At December 31, 2014, the Company had 1.5 million shares of treasury stock.

Valuation Assumptions

The Company uses the Black-Scholes option pricing model to determine the fair value of its stock options. The determination of the fair value of stock option awards on the date of grant using option pricing models is affected by the Company’s stock price, as well as assumptions regarding a number of complex and subjective variables. These variables include the Company’s expected stock price volatility over the expected term of the awards, actual and projected stock option exercise behaviors, risk-free interest rates and expected dividends. The expected term of options represents the period of time over which options are expected to be outstanding and is estimated based on historical experience. Expected volatility is based on the historical volatility of the Company’s common stock calculated over the expected term of the option. The risk-free interest rate is based on U.S. Treasury yields in effect at the date of grant.

Weighted average assumptions used for stock options issued in 2014, 2013 and 2012:



	2014		2013		2012
Expected life (in years)	6.0		6.0		6.0
Expected volatility	67.8	%	68.4	%	67.0	%
Expected dividends	0.1	%	0.1	%	0.1	%
Risk-free interest rate	1.80	%	1.01	%	0.93	%

Restricted Stock



	Shares		Weighted Average Grant Date Fair Value
Unvested at December 31, 2013	518,000		19.6
Granted	10,000		16.76
Vested	(139,250	)	20.83
Forfeited/Expired	(46,250	)	19.46
Unvested at December 31, 2014	342,500		19.04

Pre-tax unrecognized compensation expense for unvested restricted stock was $4.7 million at December 31, 2014, and will be recognized as an expense over a weighted-average period of 2.6 years.