STOCK COMPENSATION

12 Months Ended

Dec. 31, 2017

STOCK COMPENSATION

The Company recorded stock compensation of $1.5 million, $2.0 million, and $2.3 million in 2017, 2016, and 2015, respectively. Options to the Board of Directors vest immediately. All options expire 10 years from the grant date. The restricted stock awards vest over a period of three to 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 2.0 million shares are available for future issuance under the equity incentive plan at December 31, 2017. 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 89,200 stock options under this plan in 2017, 60,000 stock options under this plan in 2016, and 60,000 stock options under this plan in 2015. The Company did not grant any restricted stock awards under this plan in 2017 and 2016. The Company granted 123,500 restricted stock awards under this plan in 2015.

Stock Options

The following is a summary of activity in stock options during the year ended December 31, 2017:



	Shares Subject to Option		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in Years)	Aggregate Intrinsic Value (in thousands)
Outstanding, December 31, 2016	807,520		$	18.13
Granted	89,200		11.79
Exercised	—		—
Forfeited/Expired	(48,950	)	19.51
Outstanding, December 31, 2017	847,770		17.39		5.05	$	561
Exercisable, December 31, 2017	847,770		17.39		5.05	$	561

Additional Stock Option Information (all amounts in thousands, except for per share data):



	2017		2016		2015
Weighted-average fair value per share of stock options granted	$	6.10	$	3.62	$	5.27
Intrinsic value of stock options exercised	—		—		(3		)
Tax expense (benefit) realized for tax deductions from stock options exercised	—				(1		)
Grant date fair value of stock options vested	544		217		316
Cash received from stock options exercised	—		—		145

No options were exercised in 2017 and 2016. The Company currently uses treasury shares to satisfy any stock option exercises. At December 31, 2017 and 2016, the Company had 0.9 million and 1.1 million shares of treasury stock, respectively.

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 2017, 2016, and 2015:



	2017		2016		2015
Expected life (in years)	6.0		6.0		6.0
Expected volatility	53.8	%	53.3	%	49.4	%
Expected dividends	0.1	%	0.1	%	0.1	%
Risk-free interest rate	1.82	%	1.33	%	1.78	%

Restricted Stock



	Shares		Weighted Average Grant Date Fair Value
Unvested at December 31, 2016	153,570		14.92
Granted	—		—
Vested	(119,173	)	16.02
Forfeited/Expired	(2,500	)	18.02
Unvested at December 31, 2017	31,897		10.56

Pre-tax unrecognized compensation expense for unvested restricted stock was $0.2 million at December 31, 2017, and will be recognized as an expense over a weighted-average period of 0.5 years.

The fair value of restricted stock vested, based on the stock's fair value on the vesting date, was $1.5 million, $1.6 million, and $0.4 million for the years ended December 31, 2017, 2016, and 2015, respectively.