Stock Based Compensation

9 Months Ended

Sep. 30, 2013

Stock-Based Compensation [Abstract]

Stock-Based Compensation

Note 10 – Stock Based Compensation

The Company's 2008 Stock Incentive Plan ("2008 Plan") was adopted by the Board of Directors of the Company on February 19, 2008, and approved by shareholders on April 22, 2008, at the Company's 2008 Annual Meeting of Shareholders.  The 2008 Plan provides for the granting of restricted stock awards and incentive and non-statutory options to employees and directors on a periodic basis, at the discretion of the Board of Directors or a Board designated committee.  The 2008 Plan authorizes the issuance of up to 500,000 shares of common stock. The 2008 Plan replaced the Company's stock option plan that was approved by the shareholders at the 1997 Annual Meeting, which plan terminated in 2006.

Stock Options

Accounting guidance requires that compensation cost relating to share-based payment transactions be recognized in the financial statements with measurement based upon the fair value of the equity or liability instruments issued.

A summary of stock option transactions for the nine months ended September 30, 2013 is as follows:

	Option Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value ($000)
Outstanding at December 31, 2012		240,517	$	24.28
Granted		-		-
Exercised		17,475		17.70
Forfeited		11,795		27.64
Expired		4,000		24.00
Outstanding at September 30, 2013		207,247	$	24.65	3.09 years		$	267
Exercisable at September 30, 2013		207,247	$	24.65	3.09 years		$	267

The fair value of options is estimated at the date of grant using the Black-Scholes option pricing model and expensed over the options' vesting period.  As of September 30, 2013, there was no unrecognized compensation expenses related to nonvested stock option grants.

Restricted Stock

The Company from time-to-time grants shares of restricted stock to key employees and non-employee directors.  These awards help align the interests of these employees and directors with the interests of the shareholders of the Company by providing economic value directly related to increases in the value of the Company's common stock.  The value of the stock awarded is established as the fair market value of the stock at the time of the grant.  The Company recognizes expense, equal to the total value of such awards, ratably over the vesting period of the stock grants. Restricted stock granted cliff vests over 24 to 36 months based on the term of the award.

Nonvested restricted stock activity for the nine months ended September 30, 2013 is summarized in the following table.

Restricted Stock	Shares		Weighted Average Grant Date Value
Nonvested at January 1, 2013		39,327	$	20.17
Granted		12,121		20.47
Vested		18,432		21.44
Forfeited		-		-
Nonvested at September 30, 2013		33,016	$	19.58

As of September 30, 2013 and December 31, 2012, there was $383,000 and $525,000 in unrecognized compensation cost related to nonvested restricted stock granted under the 2008 Plan.  The weighted average period over which this cost is expected to be recognized is 1.20 years.   The share based compensation expense for nonvested restricted stock was $211,000 and $260,000 during the first nine months of 2013 and 2012, respectively.

Starting in 2010, the Company began offering its outside directors alternatives with respect to director compensation. For 2012, the regular quarterly board retainer could be received in the form of either (i) $3,000 in cash or (ii) shares of immediately vested, but restricted stock with a market value of $4,688. Monthly meeting fees can also be received as $600 per meeting in cash or $750 in immediately vested, but restricted stock.  For 2013, all 11 outside directors have elected to receive stock in lieu of cash for their monthly retainer board meeting fees. Only outside directors receive board fees. The Company issued 9,968 and 14,217 shares and recognized share based compensation expense of $213,000 and $308,000 during the first nine months of 2013 and 2012, respectively.