10. SHARE-BASED COMPENSATION

Stock Options:

The Company has issued non-qualified and incentive stock options to employees and nonemployee directors. The fair value of these options are estimated on the date of grant using the Black-Scholes option pricing model, which requires estimates of the expected term of the option, the expected volatility of the price of the Company’s common stock, dividend yield and the risk-free interest rate. Options outstanding as of December 31, 2015 generally vest over a period of three years with an expiration term of ten years. The exercise price of these options ranges from $24.26 to $31.55. The expected volatility is based on the historical volatility of the Company’s common stock over the period of time equivalent to the expected term for each award. Due to the Company’s lack of option exercise history, the expected term is calculated using the simplified method defined as the midpoint between the vesting period and the contractual term of each award. The risk free interest rate is based on the U.S. Treasury yield curve in effect on the date of grant which most closely corresponds to the expected term of the option. All of the options were issued prior to the Company declaring its first dividend in December 2015; and therefore, a dividend yield is not utilized in the calculation. The weighted average input assumptions used and resulting fair values were as follows:

	2015			2014
Expected life (in years)		6			6
Risk-free interest rate		1.71	%		1.61	%
Expected volatility		50.91	%		63.15	%
Dividend yield		-			-

The following table summarizes the stock option activity:

	Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (Yrs)		Aggregate Intrinsic Value
Outstanding at December 31, 2014		67,375	$	26.05
Granted		66,000		30.99
Exercised		(1,666)		26.52
Forfeited		(33,336)		29.54
Outstanding at December 31, 2015		98,373	$	28.17		8.52		256,175
Exerciseable at December 31, 2015		34,615	$	26.27		7.92		145,052

The weighted-average grant date fair value of options granted was $15.24. The unrecognized compensation expense calculated under the fair value method for shares expected to vest as of December 31, 2015 was approximately $0.6 million and is expected to be recognized over a weighted average period of 1.9 years. The Company received $44,000 in cash proceeds from the exercise of stock options during 2015. No options were exercised in 2014 or 2013.

Restricted Stock:

The Company has issued restricted stock to employees and nonemployee directors generally with terms ranging up to seven years. The fair value is equal to the market price of the Company’s common stock on the date of grant. Expense for restricted stock is amortized ratably over the vesting period. The following table summarizes the restricted stock activity:

	Shares		Weighted-Average Grant Date Fair Value
Unvested at December 31, 2014		333,676	$	25.31
Granted		58,685		31.39
Vested		(124,053)		25.68
Forfeited		(4,600)		31.55
Unvested at December 31, 2015		263,708	$	26.38

The total share-based compensation expense charged against income during the years ended December 31, 2015, 2014, and 2013 were $3,081,000, $3,918,000, and $3,209,000, respectively. Included in share-based compensation expense for 2015 is $734,000 for 46,530 shares of performance awards to be issued to certain key employees based on achieving 2015 financial plan that will vest on December 31, 2016. The Company intends to issue additional performance awards in 2016 to certain key employees if certain 2016 financial plans are met. During 2015, the Company issued 12,155 shares to members of the Board of Directors including 4,600 shares that were later forfeited. The total income tax benefit recognized in the consolidated statement of income for these restricted stock awards was approximately $1,012,000, $1,398,000 and $1,123,000 for the years ending December 31, 2015, 2014, and 2013, respectively. The tax benefit recognized in additional paid-in capital upon vesting of restricted stock awards and exercise of stock options was approximately $247,000, $275,000 and $383,000 for the years ending December 31, 2015, 2014, 2013, respectively. There was approximately $4.6 million of total unrecognized compensation cost related to restricted stock awards as of December 31, 2015. The cost is expected to be recognized over a weighted-average period of approximately 2.2 years.