NOTE 6 – STOCK COMPENSATION EXPENSE

From time to time the Company grants stock options to its employees. The Company estimates the fair value of the options at the time they are granted to employees and expenses that fair value over the vesting period of the option grant.

On March 18, 2015, 47,650 incentive stock options were granted out of the 2012 Long Term Incentive Plan at an exercise price of $14.72, the closing market price of Premier’s common stock on the grant date. These options vest in three equal annual installments ending on March 18, 2018. On March 19, 2014, 46,300 incentive stock options were granted out of the 2012 Long Term Incentive Plan at an exercise price of $14.43, the closing market price of Premier’s common stock on the grant date. These options vest in three equal annual installments ending on March 19, 2017.

The fair value of the Company's employee stock options granted is estimated at the date of grant using the Black-Scholes option-pricing model. This model requires the input of highly subjective assumptions, changes to which can materially affect the fair value estimate. Additionally, there may be other factors that would otherwise have a significant effect on the value of employee stock options granted but are not considered by the model. The assumptions used in the Black-Scholes option-pricing model are as follows

	2015			2014
Risk-free interest rate		1.41	%		2.78	%
Expected option life (yrs)		5.00			10.00
Expected stock price volatility		17.20	%		31.19	%
Dividend yield		3.53	%		3.33	%
Weighted average fair value of options granted during the year	$	1.37		$	3.74

The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield in effect at the time of the grant. The expected option life for the 2015 grant was based upon the weighted-average life of options exercised from January 1, 2012 through December 31, 2014. The expected option life for the 2014 grant was estimated since there had been little option exercise history at the time of the grant. The expected stock price volatility is based on historical volatilities of the Company’s common stock. The dividend yield was estimated by annualizing the current quarterly dividend on the Company’s common stock at the time of the option grant.

On March 18, 2015, 7,000 shares of Premier’s common stock were granted to President and CEO, Robert W. Walker as stock-based bonus compensation under the 2012 Long-term Incentive Plan. The fair value of the stock at the time of the grant was $14.72 per share based upon the closing price of Premier’s stock on the date of grant and $103,000 of stock-based compensation was recorded as a result.

Compensation expense of $139,000 was recorded for the first three months of 2015 while $42,000 was recorded for the first three months of 2014. Stock-based compensation expense is recognized ratably over the requisite vesting period for all awards. Unrecognized stock-based compensation expense related to stock options totaled $134,000 at March 31, 2015. This unrecognized expense is expected to be recognized over the next 35 months based on the vesting periods of the options.

A summary of the Company’s stock option activity and related information is presented below for the three months ended March 31:

	- - - - - - 2015 - - - - - -					- - - - - - 2014 - - - - - -
	Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price
Outstanding at beginning of year		273,942		$	11.06		354,281		$	9.84
Grants		47,650			14.72		46,300			14.43
Exercises		(1,167	)		9.15		(8,701	)		7.24
Forfeitures or expired		(3,833	)		12.24		(2,001	)		9.30
Outstanding at March 31,		316,592		$	11.61		389,879		$	10.45

Exercisable at March 31,		224,958					278,228
Weighted average remaining life of options outstanding		6.4					6.4
Weighted average fair value of options granted during the year	$	1.37				$	3.74

Options outstanding at period-end are expected to fully vest.

Additional information regarding stock options outstanding and exercisable at March 31, 2015, is provided in the following table:

	- - - - - - - - Outstanding - - - - - - - -						- - - - - - - - Currently Exercisable - - - - - - - -
Range of Exercise Prices	Number		Weighted Average Exercise Price		Aggregate Intrinsic Value		Number		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Aggregate Intrinsic Value

$6.50 to $10.00		113,482	$	7.56	$	871		113,482		6.2	$	7.56	$	871
$10.01 to $12.50		40,500		11.39		156		26,374		8.0		11.39		101
$12.51 to $15.00		139,110		14.22		139		61,602		4.0		13.75		91
$15.01 to $17.50		23,500		16.00		-		23,500		0.9		16.00		-
Outstanding - Mar 31, 2015		316,592		11.61	$	1,166		224,958		5.2		10.58	$	1,063