Stock-based Compensation

6 Months Ended

Jun. 30, 2012

Stock-based Compensation [Abstract]

Stock-based Compensation

(8) Stock-based Compensation

Under the terms of the Company’s stock option plans adopted in 1999 and 2009, options have been granted to key employees and directors to purchase shares of the Company’s stock. Under the Suffolk Bancorp 2009 Stock Incentive Plan (“the Plan”), there are 500,000 shares of the Company’s common stock reserved for issuance, of which 120,000 had been granted as of June 30, 2012. There are no remaining shares reserved for issuance under the 1999 Stock Option Plan. Options are awarded by the Compensation Committee of the Board of Directors. Both plans provide that the option price shall not be less than the fair value of the common stock on the date the option is granted. All options are exercisable for a period of ten years or less. Both plans provide for but do not require the grant of stock appreciation rights that the holder may exercise instead of the underlying option. When the stock appreciation right is exercised, the underlying option is canceled. The optionee receives shares of common stock or cash with a fair market value equal to the excess of the fair value of the shares subject to the option at the time of exercise (or the portion thereof so exercised) over the aggregate option price of the shares set forth in the option agreement. The exercise of stock appreciation rights is treated as the exercise of the underlying option. Options granted prior to 2010 vest after one year. Options granted in 2011 are exercisable over a three-year period commencing three years from the date of grant at a rate of one third per year. Options granted in 2012 are exercisable over a three-year period commencing one year from the date of grant at a rate of one third per year.

On December 30, 2011, the Company granted an award of 30,000 non-qualified stock options at an exercise price of $10.79 per share. The stock option award was granted to the President and Chief Executive Officer as a material inducement to employment with the Company. The non-qualified options were not issued as part of any of the Company’s registered stock-based compensation plans. The options are exercisable over a three-year period commencing three years from the date of grant at a rate of one third per year. For the six months ended June 30, 2012, $18,000 was recognized as compensation expense based on the original fair value of the options. The total remaining unrecognized compensation cost of $161,000 will be expensed over the remaining vesting period of 4.50 years.

Stock-based compensation for all other share-based payments to employees, including grants of employee stock options, is recorded in the financial statements based on their fair values. During the six months ended June 30, 2012, $73,000 was recognized as compensation expense. The remaining unrecognized compensation cost of $755,000 will be expensed over the remaining weighted vesting period of approximately three years.

A summary of stock option activity follows:

	Number of Shares			Weighted-Average Exercise Price Per Share
Outstanding - January 1, 2012		81,500		$	26.91
Granted		100,000		$	12.93
Exercised		—			—
Forfeited or expired		(26,000	)	$	32.29
Outstanding - June 30, 2012		155,500		$	17.02

The following table presents weighted-average information regarding options granted in 2012:

Black-Scholes Assumptions for Options Granted During the Six Months Ended June 30, 2012:
Risk-free interest rate	0.83	%
Expected dividend yield	—
Expected life in years	10
Expected volatility	42.98	%

The following summarizes shares subject to purchase from stock options outstanding and exercisable as of June 30, 2012:

	Outstanding						Exercisable
Range of Exercise Prices	Shares		Weighted-Average Remaining Contractual Life		Weighted-Average Exercise Price		Shares		Weighted-Average Remaining Contractual Life		Weighted-Average Exercise Price
$10.79 - $12.44		90,000		9.7 years	$	11.47		—		—		—
$13.13 - $13.44		60,000		9.7 years	$	13.34		—		—		—
$28.30 - $31.83		19,000		4.6 years	$	30.36		19,000		4.6 years	$	30.36
$32.90 - $34.95		16,500		3.7 years	$	34.00		16,500		3.7 years	$	34.00
		185,500		8.6 years	$	16.01		35,500		4.2 years	$	32.05