Share-Based Compensation

A broad-based stock incentive plan, the 2006 Stock Incentive Plan, was adopted by the Corporation’s shareholders on April 18, 2006 and was amended and restated on May 2, 2012. Awards granted under this Plan as of September 30, 2014 were stock options granted in 2007, 2008, 2009, 2012 and 2013 and long-term restricted shares issued in 2010, 2011, 2012 and 2013. In addition, the Corporation has nonqualified stock option agreements outside of the 2006 Stock Incentive Plan. Grants under the nonqualified stock option agreements were made from 2005 to 2007.

Stock Options

During the nine months ended September 30, 2014, the Corporation granted 117,000 stock options to certain employees. All outstanding stock options were granted at an exercise price equal to the fair value of the common stock on the date of grant. The maximum option term is ten years and the options generally vest over three years as follows: one-third of the underlying shares vest on each the first, second and third anniversaries of the grant date.

The Corporation recognizes compensation expense for awards with a graded vesting schedule on a straight-line basis over the requisite service period for the entire award. The expense recorded for stock options was $71 and $26 for the three months ended September 30, 2014 and 2013, and $131 and $52 for the nine months ended September 30, 2014 and 2013, respectively.

The following table summarizes the Corporation's stock options outstanding at September 30, 2014:



	Outstanding		Exercisable
	Number	Weighted Average Remaining Contractual Life (Years)	Number	Weighted Average Exercise Price
Range of Exercise Prices
$5.34-$5.39	37,500	7.16	25,833	$	5.39
$9.07-$9.56	126,530	8.66	41,066	9.19
$11.03	109,500	9.64	—	—
$12.12	7,500	9.82	—	—
$14.47	78,000	3.35	78,000	14.47
$16.00-$16.50	32,500	2.22	32,500	16.04
$19.10	30,000	1.34	30,000	19.10
$19.17	30,000	0.34	30,000	19.17
Outstanding at end of period	451,530	6.37	237,399	$	13.96

A summary of the status of stock options for the nine month periods ended September 30, 2014 and 2013 is presented in the table below:



	September 30,				September 30,
	2014				2013
	Options		Weighted Average Exercise Price per Share		Options	Weighted Average Exercise Price per Share
Outstanding at beginning of period	337,696		$	12.43	232,000	$	14.50
Granted	117,000		11.10		137,363	9.18
Forfeited or expired	(1,500	)	14.47		—	—
Exercised	(1,666	)	9.56		—	—
Stock dividend or split	—		—		—	—
Outstanding at end of period	451,530		$	12.08	369,363	$	12.52
Exercisable at end of period	239,065		$	13.93	208,667	$	15.52

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the quoted price of the Corporation's common stock for those awards that have an exercise price then below the closing price. As of September 30, 2014, the Corporation had outstanding options to purchase an aggregate of 282,696 shares with an exercise price below the closing price of the Corporation's stock, resulting in an aggregate intrinsic value of $1,362.

For the third quarter 2014, the per share weighted-average fair value of stock options granted was $3.57 compared to $2.35 for the third quarter 2013. The per share weighted-average fair value of stock options granted during the first nine months of 2014 and 2013 was $3.24 and $2.15, respectively, on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:



	Three Months Ended September 30,				Nine Months Ended September 30
	2014		2013		2014		2013
Dividend Yield	2.15	%	3.03	%	2.22	%	3.07	%
Expected volatility	34.47	%	32.54	%	34.49	%	32.60	%
Risk-free interest rate	2.18	%	1.98	%	2.07	%	1.37	%

Restricted Shares

Shares of long-term restricted stock generally vest in two equal installments on the second and third anniversaries of the date of grant, or upon the earlier death or disability of the recipient or a qualified change of control of the Corporation. The expense recorded for long-term restricted stock was $35 and $52 for the three months ended September 30, 2014 and 2013, respectively. For the nine months ended September 30, 2014 and 2013 the expense recorded was $107 and $173, respectively.

The market price of the Corporation’s common shares at the date of grant is used to estimate the fair value of long-term restricted stock. A summary of the status of outstanding restricted shares at September 30, 2014 is presented in the table below:



	Nonvested Shares		Weighted Average Grant Date Fair Value
Nonvested at January 1, 2014	83,355		$	5.86
Granted	—		—
Vested	(44,803	)	5.35
Forfeited or expired	—		—
Nonvested at September 30, 2014	38,552		$	6.45

Stock Appreciation Rights (“SARS”)

In 2006, the Corporation issued an aggregate of 30,000 SARS at $19.00 per share, 15,500 of which have expired due to employee terminations. The SARS vest over three years as follows: one-third of the underlying shares on each of the first, second and third anniversaries of the grant date. Any unexercised portion of the SARS shall expire at the end of the stated term which is specified at the date of grant and shall not exceed ten years. The term of the SARS issued in 2006 will expire in January 2016. The expense recorded for SARS for the nine months ended September 30, 2014, was $0 and for 2013 was $10.