EMPLOYEE BENEFIT PLANS

12 Months Ended

Dec. 31, 2012

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

16. EMPLOYEE BENEFIT PLANS

(a) Pension Plan–We are a participant in the Pentegra Defined Benefit Plan for Financial Institutions (“The Pentegra DB Plan”), which is a tax-qualified, multi-employer defined benefit pension plan, covering employees hired before June 1, 2002. Because the plan was curtailed, employees hired on or after that date are not eligible for membership in the fund. Eligible employees are 100% vested at the completion of five years of participation in the plan. Our policy is to contribute annually the minimum funding amounts. The Pentegra DB Plan’s Employer Identification Number is 13-5645888 and the Plan Number is 333.

The Pentegra DB Plan is a single plan under Internal Revenue Code Section 413(c) and, as a result, all of the assets stand behind all of the liabilities. Accordingly, under the Pentegra DB Plan, contributions made by a participating employer may be used to provide benefits to participants of other participating employers. Total contributions received by the Pentegra DB Plan, as reported on Form 5500, for the plan years ending June 30, 2011 and 2010 totaled $299.7 million and $203.6 million, respectively.

Employer contributions and administrative expenses charged to operations for the years ended December 31, 2012, 2011 and 2010 totaled $433,000, $404,000, and $1,000, respectively. Accrued liabilities associated with the plan as of December 31, 2012 and 2011 were $90,000 and $221,000, respectively. Our contribution for 2012, 2011 and 2010 was not more than 5% of the total contributions made to the Pentegra DB Plan. There are no collective bargaining agreements in place that require contributions to the plan. The funded status of our plan as of July 1, 2012 and 2011 was 100% and 88% respectively.

(b) KSOP–We have a combined 401(k)/Employee Stock Ownership Plan. The plan is available to all employees meeting certain eligibility requirements. The plan allows employee contributions up to 50% of their compensation up to the annual dollar limit set by the IRS. The employer matches 100% of the employee contributions up to 4% of the employee’s compensation. Employees are 100% vested in matching contributions upon meeting the eligibility requirements of the plan. Shares of our common stock are acquired in non-leveraged transactions. At the time of purchase, the shares are released and allocated to eligible employees determined by a formula specified in the plan agreement. Accordingly, the plan has no unallocated shares. The number of shares to be purchased and allocated is at the Board of Directors discretion. In an effort to reduce costs, we have suspended the annual employee stock ownership contribution. Employer matching contributions and administrative expenses charged to operations for the plan for the years ended December 31, 2012, 2011 and 2010 were $305,000, $513,000, and $540,000, respectively.

Shares in the plan and the fair value of shares released during the year charged to compensation expense were as follows:

	Year Ended
	December 31,
	2012		2011		2010
KSOP shares (ending)		167,620		226,517		236,625
Shares released		-		-		-
Compensation expense	$	-	$	-	$	-

(c) Stock Based Compensation Plan – Our 2006 Stock Option and Incentive Compensation Plan, which is stockholder approved, authorizes us to grant restricted stock and incentive or non-qualified stock options to key employees and directors for a total of 763,935 shares of our common stock. We believe that the ability to award stock options and other forms of stock-based incentive compensation can assist us in attracting and retaining key employees. Stock-based incentive compensation is also a means to align the interests of key employees with those of our stockholders by providing awards intended to reward recipients for our long-term growth. Options to purchase shares generally vest over periods of one to five years and expire ten years after the date of grant. We issue new shares of common stock upon the exercise of stock options. If options or awards granted under the 2006 Plan expire or terminate for any reason without having been exercised in full or released from restriction, the corresponding shares shall again be available for option or award for the purposes of the Plan. At December 31, 2012, options and restricted stock available for future grant under the 2006 Plan totaled 268,412.

Stock Options – The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model that uses various weighted-average assumptions. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is based on the fluctuation in the price of a share of stock over the period for which the option is being valued and the expected life of the options granted represents the period of time the options are expected to be outstanding.

The weighted-average assumptions for options granted during the years ended December 31, 2012, 2011 and 2010 and the resulting estimated weighted average fair value per share is presented below.

	December 31,
	2012			2011			2010
Assumptions:
Risk-free interest rate		1.77	%		1.87	%		3.31	%
Expected dividend yield		-	%		-	%		-	%
Expected life (years)		10			10			10
Expected common stock market price volatility		55	%		45	%		37	%
Estimated fair value per share	$	1.99		$	0.86		$	2.17

A summary of option activity under the 1998 and 2006 Plans for the year ended December 31, 2012 is presented below:

						Weighted
				Weighted		Average
	Number			Average		Remaining	Aggregate
	of			Exercise		Contractual	Intrinsic
	Options			Price		Term	Value
							(Dollars In Thousands)
Outstanding, beginning of period		363,240		$	9.62
Granted during period		41,000			3.08
Forfeited during period		(11,500	)		1.97
Exercised during period		-			-
Outstanding, end of period		392,740		$	9.16	6.8	$	49
Eligible for exercise at period end		193,776		$	14.55	5.0	$	8

There were no options exercised, modified or settled in cash during the 2012, 2011 and 2010 periods. Management expects all outstanding unvested options will vest.

Compensation cost related to options granted under the 2006 Plan that was charged against earnings for the years ended December 31, 2012, 2011 and 2010 was $114,000, $111,000 and $100,000, respectively. As of December 31, 2012 there was $286,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the 2006 Plan. That cost is expected to be recognized over a weighted-average period of 3.1 years.

Restricted Stock – In addition to stock options, on December 31, 2010, we granted 36,855 shares of restricted common stock at the weighted average current market price of $4.07. No restricted stock had been granted prior to December 31, 2010. The restricted stock became fully vested on December 31, 2012, as the recipient continued to perform substantial services for the Bank through that date. Although fully vested, the shares remain subject to restrictions on transfer. The recipient may only transfer, pledge or dispose of the restricted stock in proportion to the percentage of the preferred shares originally issued to the U.S. Treasury that have been redeemed.

On September 19, 2012 our board of directors adopted the 2012 Non-Employee Director Equity Compensation Program (the “Director Program”). The Director Program enables us to compensate non-employee directors for their service with stock awards. We currently do not pay cash compensation to non-employee directors pursuant to agreements with bank regulatory agencies. The board has reserved 200,000 of the shares authorized for issuance under our shareholder approved 2006 Stock Option and Incentive Compensation Plan for stock awards under the Director Program.

The Director Program provides that each non-employee director elected or continuing in office on the date of each annual meeting of the Corporation’s shareholders will automatically receive an award of restricted stock on that date having a value of $30,000, based on the closing sale price per share of the Corporation’s common stock on the award date, rounded up to the next whole number. The recipient may not transfer, pledge or dispose of the restricted stock until the close of business on the day immediately preceding the first anniversary of the award date. The transfer restrictions will also expire upon the occurrence of a Change of Control, as defined in the Plan, or upon the recipient’s death or disability. If a director ceases to serve as a member of the board for any reason, that director will automatically forfeit any unvested shares subject to an award. Any dividends declared on the restricted stock prior to vesting will be retained and paid only on the date the transfer restrictions expire.

In addition, the Director Program provides for an initial $30,000 grant of restricted stock to each non-employee director in office on the date the Program is adopted. Accordingly, on September 19, 2012, the Company’s eight non-employee directors received an initial award of 8,241 restricted shares each, or 65,928 shares in total, that vest at the close of business on the day immediately preceding the date of the 2013 annual meeting of the Corporation’s shareholders, provided that the recipient has continued to serve as a member of the Board as of the date of vesting.

A summary of changes in our non-vested restricted shares for the year ended December 31, 2012 is presented below:

				Weighted
				Average
	Non-vested			Grant Date
	Shares			Fair Value
Outstanding, beginning of period		18,428		$	4.07
Granted during period		65,928			3.64
Vested during period		(51,392	)		3.79
Forfeited during period		-			-
Outstanding, end of period		32,964		$	3.64

Compensation cost related to restricted stock granted under the 2006 Plan that was charged against earnings for the years ended December 31, 2012, 2011 and 2010 was $195,000, $75,000 and $75,000, respectively.  As of December 31, 2012 there was $120,000 of total unrecognized compensation cost related to non-vested shares granted under the Plan.  That cost is expected to be recognized over the remaining vesting period of .50 years. 

(d) Employee Stock Purchase Plan – We maintain an Employee Stock Purchase Plan whereby eligible employees have the option to purchase common stock of the Corporation through payroll deduction at a 10% discount. The purchase price of the shares under the plan will be 90% of the closing price of the common stock at the date of purchase. The plan provides for the purchase of up to 100,000 shares of common stock, which may be obtained by purchases issued from a reserve. Funding for the purchase of common stock is from employee contributions. Total compensation cost charged against earnings for the Plan for the periods ended December 31, 2012, 2011 and 2010 totaled $4,000, $6,000 and $9,000, respectively.