Note 8 - Stock-Based Compensation

9 Months Ended

Sep. 30, 2014

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

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

8. Stock-Based Compensation

For the three months ended September 30, 2014 and 2013, the Company’s net income, as reported, includes $0.5 million and $0.4 million, respectively, of stock-based compensation costs and $0.2 million and $0.2 million, respectively, of income tax benefits related to the stock-based compensation plans. For the nine months ended September 30, 2014 and 2013, the Company’s net income, as reported, includes $3.6 million and $2.9 million, respectively, of stock-based compensation costs and $1.4 million and $1.1 million, respectively, of income tax benefits related to the stock-based compensation plans.

The Company estimates the fair value of stock options using the Black-Scholes valuation model. Key assumptions used to estimate the fair value of stock options include the exercise price of the award, the expected option term, the expected volatility of the Company’s stock price, the risk-free interest rate over the options’ expected term and the annual dividend yield. The Company uses the fair value of the common stock on the date of award to measure compensation cost for restricted stock unit awards. Compensation cost is recognized over the vesting period of the award using the straight line method. There were 2,800 and 2,400 restricted stock units granted during the three months ended September 30, 2014 and 2013, respectively. During the nine months ended September 30, 2014 and 2013, the Company granted 266,895 and 246,045 restricted stock units, respectively. There were no stock options granted during the three and nine months ended September 30, 2014 and 2013.

The 2014 Omnibus Incentive Plan (“Omnibus Plan”) became effective on May 20, 2014 after approval by the stockholders. The Omnibus Plan authorizes the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”) to grant a variety of equity compensation awards as well as long-term and annual cash incentive awards, all of which can, but need not, be structured so as to comply with Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). The Omnibus Plan authorizes the issuance of 1,100,000 shares. To the extent that an award under the Omnibus Plan is cancelled, expired, forfeited, settled in cash, settled by issuance of fewer shares than the number underlying the award, or otherwise terminated without delivery of shares to a participant in payment of the exercise price or taxes relating to an award, the shares retained by or returned to the Company will be available for future issuance under the Omnibus Plan. Although, commencing upon the approval of the Omnibus Plan by stockholders, no further awards may be granted under the Company’s 2005 Omnibus Incentive Plan, 1996 Stock Option Incentive Plan, and 1996 Restricted Stock Incentive Plan (the “Prior Plans”), all outstanding awards under the Prior Plans shall continue in accordance with their terms. At September 30, 2014, there were 1,097,200 shares available for delivery in connection with awards under the Omnibus Plan. To satisfy stock option exercises or fund restricted stock and restricted stock unit awards, shares are issued from treasury stock, if available; otherwise new shares are issued. The exercise price per share of a stock option grant may not be less than the fair market value of the common stock of the Company, as defined in the Omnibus Plan, on the date of grant and may not be re-priced without the approval of the Company’s stockholders. Options, stock appreciation rights, restricted stock, restricted stock units and other stock based awards granted under the Omnibus Plan are generally subject to a minimum vesting period of three years with stock options having a 10-year maximum contractual term. Other awards do not have a contractual term of expiration. The Compensation Committee is authorized to grant awards that vest upon a participant’s retirement. These amounts are included in stock-based compensation expense at the time of the participant’s retirement eligibility.

The following table summarizes the Company’s restricted stock unit (“RSU”) awards under the Omnibus Plan and the Prior Plans in the aggregate at or for the nine months ended September 30, 2014:

	Shares			Weighted-Average Grant-Date Fair Value
Non-vested at December 31, 2013		346,584		$	14.08
Granted		266,895			20.17
Vested		(200,324	)		16.89
Forfeited		(19,142	)		15.54
Non-vested at September 30, 2014		394,013		$	16.71
Vested but unissued at September 30, 2014		217,227		$	16.92

As of September 30, 2014, there was $4.8 million of total unrecognized compensation cost related to RSU awards granted under the Omnibus Plan and the Prior Plans. That cost is expected to be recognized over a weighted-average period of 3.2 years. The total fair value of awards vested during the three months ended September 30, 2014 and 2013 were $4,000 for each respective period. The total fair value of awards vested for the nine months ended September 30, 2014 and 2013 were $4.1 million and $2.8 million, respectively. The vested but unissued RSU awards consist of awards made to employees and directors who are eligible for retirement. According to the terms of these awards, which provide for vesting upon retirement, these employees and directors have no risk of forfeiture. These shares will be issued at the original contractual vesting and settlement dates.

The following table summarizes certain information regarding the stock option awards under the Omnibus Plan and the Prior Plans in the aggregate at or for the nine months ended September 30, 2014:

	Shares			Weighted- Average Exercise Price		Weighted-Average Remaining Contractual (years)		Aggregate Intrinsic Value ($000)*
Outstanding at December 31, 2013		306,630		$	16.02		-		-
Granted		-			-		-		-
Exercised		(105,925	)		17.01		-		-
Forfeited		(1,300	)		19.37		-		-
Outstanding at September 30, 2014		199,405		$	15.46		3.2	$	627
Exercisable shares at September 30, 2014		199,405		$	15.46		3.2	$	627

* The intrinsic value of a stock option is the difference between the market value of the underlying stock and the exercise price of the option.

As of September 30, 2014, there is no remaining unrecognized compensation cost related to stock options granted.

Cash proceeds, fair value received, tax benefits and the intrinsic value related to stock options exercised during the three and nine months ended September 30, 2014 and 2013 are provided in the following table:

	For the three months ended September 30,					For the nine months ended September 30,
(In thousands)	2014		2013			2014		2013
Proceeds from stock options exercised	$	82	$	77		$	512	$	312
Fair value of shares received upon exercised of stock options		-		2,323			1,290		4,074
Tax benefit related to stock options exercised		1		(71	)		94		97
Intrinsic value of stock options exercised		18		436			335		813

Phantom Stock Plan: The Company maintains a non-qualified phantom stock plan as a supplement to its profit sharing plan for officers who have achieved the level of Senior Vice President and above and completed one year of service. However, officers who had achieved at least the level of Vice President and completed one year of service prior to January 1, 2009 remain eligible to participate in the phantom stock plan. Awards are made under this plan on certain compensation not eligible for awards made under the profit sharing plan, due to the terms of the profit sharing plan and the Internal Revenue Code. Employees receive awards under this plan proportionate to the amount they would have received under the profit sharing plan, but for limits imposed by the profit sharing plan and the Internal Revenue Code. The awards are made as cash awards, and then converted to common stock equivalents (phantom shares) at the then current market value of the Company’s common stock. Dividends are credited to each employee’s account in the form of additional phantom shares each time the Company pays a dividend on its common stock. In the event of a change of control (as defined in this plan), an employee’s interest is converted to a fixed dollar amount and deemed to be invested in the same manner as his interest in the Bank’s non-qualified deferred compensation plan. Employees vest under this plan 20% per year for 5 years. Employees also become 100% vested upon a change of control. Employees receive their vested interest in this plan in the form of a cash lump sum payment or installments, as elected by the employee, after termination of employment. The Company adjusts its liability under this plan to the fair value of the shares at the end of each period.

The following table summarizes the Phantom Stock Plan at or for the nine months ended September 30, 2014:

Phantom Stock Plan	Shares			Fair Value
Outstanding at December 31, 2013		59,323		$	20.70
Granted		9,142			19.82
Forfeited		(55	)		19.74
Distributions		(1,736	)		19.64
Outstanding at September 30, 2014		66,674		$	18.27
Vested at September 30, 2014		66,557		$	18.27

The Company recorded stock-based compensation (benefit) expense for the Phantom Stock Plan of ($0.1) million and $0.1 million for the three months ended September 30, 2014 and 2013, respectively. The total fair value of the distributions from the Phantom Stock Plan was $21,000 for the three months ended September 30, 2014. There were no distributions made from the Phantom Stock Plan during the three months ended September 30, 2013.

For the nine months ended September 30, 2014 and 2013, the Company recorded stock-based compensation (benefit) expense for the Phantom Stock Plan of ($0.1) million and $0.2 million, respectively. The total fair value of the distributions from the Phantom Stock Plan during the nine months ended September 30, 2014 and 2013 were $34,000 and $8,000, respectively.