Stock-Based Compensation

6 Months Ended

Jun. 30, 2014

Stock-Based Compensation

Note 8: Stock-Based Compensation

On June 28, 2013, the Company registered a new stock-based compensation plan, which superseded all other plans. There are 377,123 shares available for grant under this plan at June 30, 2014.

Stock-based compensation expense related to stock awards during the three month periods ended June 30, 2014 and 2013 was zero and $4 thousand, respectively, and during the six month periods ended June 30, 2014 and 2013 was $20 thousand and $126 thousand, respectively. Compensation expense for stock options is the estimated fair value of options on the date granted using the Black-Scholes Model amortized on a straight-line basis over the vesting period of the award. There was no unrecognized compensation expense related to stock options as of June 30, 2014.

Options for a total of 7,000 shares were granted and vested during the six months ended June 30, 2014. The fair value of options granted during the six months ended June 30, 2014 was $2.75. Options for a total of 89,500 shares were granted and vested during the six months ended June 30, 2013. The fair value of options granted during the six months ended June 30, 2013 was $1.03 and $1.08.

The variables used in these calculations of the fair value of the options are as follows:

	For the six months ended June 30,
	2014			2013
Risk free interest rate (5 year Treasury)		2.70	%		0.86	%
Expected dividend yield		0	%		3.6	%
Expected term (years)		5			5
Expected volatility		51.4	%		33.8	%

Stock option activity for the six months ended June 30, 2014 (unaudited) is summarized below:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value (1)
Options outstanding, January 1, 2014		191,002		$	7.35		6.8
Granted		7,000			5.99
Forfeited		—			—
Exercised		—			—
Expired		(7,239	)		14.65
Options outstanding and exercisable, June 30, 2014		190,763		$	7.02		6.7	$	84,644

(1) The aggregate intrinsic value of a stock option in the table above represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) that would have been received by the option holders had all option holders exercised their options on June 30, 2014. This amount changes based on changes in the market value of the Company’s common stock.

In the first quarter of 2014, 877 shares of restricted stock were granted to an executive officer of the Bank. Such shares will vest over 12 months, with $5 thousand to be recorded as compensation expense over this period.