STOCK-BASED COMPENSATION

3 Months Ended

Mar. 31, 2013

STOCK-BASED COMPENSATION [Abstract]

STOCK-BASED COMPENSATION

NOTE 10 — STOCK-BASED COMPENSATION

The Company has stock benefit plans that allow the Company to grant options and restricted stock to employees and directors. The awards, which have a term of up to 10 years when issued, vest over a two to five year period. The exercise price of each award equals the market price of the Company's stock on the date of the grant. The fair value of each option grant during the first quarter of 2013 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

Weighted average assumptions
Dividend yield		0.83	%
Expected volatility		17.24	%
Risk-free interest rate		0.67	%
Fair value of options granted during the period	$	3.13
Expected lives in years		5

There were no stock options granted during the three months ended March 31, 2012.

At March 31, 2013, there was $591,000 of total unrecognized compensation cost, net of estimated forfeitures, related to non-vested awards under the Company's stock option plan. That cost is expected to be recognized over a weighted average period of 16 months. Option activity under the Company's stock option plan for the quarter ended March 31, 2013 was as follows:

	At March 31, 2013
	Number of shares			Weighted average exercise price per share		Weighted average remaining contractual term (in years)		Aggregate intrinsic value ($000)
Outstanding at January 1, 2013		89,279		$	24.08
Options granted		200,000			24.21
Options exercised		—			—
Options forfeited		—			—
Options expired		(14,279	)		24.26
Outstanding at March 31, 2013		275,000		$	24.16		3.29	$	403
Options exercisable at March 31, 2013		67,129		$	24.56		1.82	$	172

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company's closing stock price on the last trading day of the first quarter and the exercise price, multiplied by the number of in-the-money options).

There were no exercises of stock options for the three months ended March 31, 2013 or 2012.

The Company issues stock of the Company as payment for director fees as permitted by the 2011 Director Stock Compensation Plan, the cost associated with these grants is included as a component of stock-based compensation. The following tables provide information regarding the Company's stock-based compensation expense:

	For the three months ended March 31,
	2013		2012
	(in thousands)
Stock-based compensation expense
Director fees	$	34	$	37
Stock option expense		59		7
Employee Stock Ownership Plan ("ESOP") expense		73		69
Total stock-based compensation expense	$	166	$	113

The Bank reports ESOP expense in an amount equal to the fair value of shares released from the ESOP to employees less dividends received on the allocated shares in the plan used for debt service. Dividends on allocated shares used to reduce ESOP expense totaled $8,000 for the three months ended March 31, 2013 and 2012. Stock-based compensation expense related to stock options resulted in a tax benefit of $18,000 and $2,000 for the three months ended March 31, 2013 and 2012, respectively.