STOCK COMPENSATION

12 Months Ended

Dec. 31, 2018

STOCK COMPENSATION

The Company recorded stock compensation of $1.1 million, $1.5 million, and $2.0 million in 2018, 2017, and 2016, 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 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 1.6 million shares are available for future issuance under the equity incentive plan at December 31, 2018. 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 80,000 stock options under this plan in 2018, 89,200 stock options under this plan in 2017, and 60,000 stock options under this plan in 2016. The Company granted 376,500 restricted stock awards under this plan in 2018. The Company did not grant any restricted stock awards under this plan in 2017 and 2016.

Stock Options

The following is a summary of activity in stock options during the year ended December 31, 2018:



	Shares Subject to Option		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in Years)	Aggregate Intrinsic Value (in thousands)
Outstanding, December 31, 2017	847,770		$	17.39
Granted	80,000		11.85
Exercised	—		—
Forfeited/Expired	(39,082	)	18.37
Outstanding, December 31, 2018	888,688		16.84		4.63	$	—
Exercisable, December 31, 2018	888,688		16.84		4.63	$	—

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



	2018		2017		2016
Weighted-average fair value per share of stock options granted	$	5.85	$	6.10	$	3.62
Grant date fair value of stock options vested	468		544		217

No options were exercised in 2018, 2017 and 2016. The Company currently uses treasury shares to satisfy any stock option exercises. At December 31, 2018 and 2017, the Company had 0.8 million and 0.9 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 2018, 2017, and 2016:



	2018		2017		2016
Expected life (in years)	6.0		6.0		6.0
Expected volatility	50.7	%	53.8	%	53.3	%
Expected dividends	0.2	%	0.1	%	0.1	%
Risk-free interest rate	2.88	%	1.82	%	1.33	%

Restricted Stock



	Shares		Weighted Average Grant Date Fair Value
Unvested at December 31, 2017	31,897		10.56
Granted	376,500		9.23
Vested	(31,897	)	10.56
Unvested at December 31, 2018	376,500		9.23

Pre-tax unrecognized compensation expense for unvested restricted stock was $2.8 million at December 31, 2018, and will be recognized as an expense over a weighted-average period of 2.5 years.

The fair value of restricted stock vested, based on the stock's fair value on the vesting date, was $0.3 million, $1.5 million, and $1.6 million for the years ended December 31, 2018, 2017, and 2016, respectively.