STOCK-BASED COMPENSATION

3 Months Ended

Mar. 31, 2012

Stock-Based Compensation

STOCK-BASED COMPENSATION

NOTE 9 – STOCK-BASED COMPENSATION

Under the terms of an incentive stock option plan adopted during 2001, shares of unissued common stock were reserved for options to officers and key employees at prices not less than the fair market value of the shares at the date of the grant. No additional shares of common stock remain reserved for future grants under the option plan approved by the shareholders. As of March 31, 2012 and December 31, 2011, 560 options were outstanding and eligible to be exercised at an exercise price of $16.83 per share. These options were subsequently exercised during April 2012. During the three months ended March 31, 2011, 263 options were exercised at $15.80 per share.

PSB granted restricted stock to certain employees having an initial market value of $200 during the three months ended March 31, 2012 and 2011. Restricted shares vest to employees based on continued PSB service over a six-year period and are recognized as compensation expense over the vesting period. Cash dividends are paid on unvested shares at the same time and amount as paid to PSB common shareholders. Cash dividends paid on unvested restricted stock shares are charged to retained earnings as significantly all restricted shares are expected to vest to employees. Unvested shares are subject to forfeiture upon employee termination. During the three months ended March 31, compensation expense recorded from amortization of restricted shares expected to vest to employees was $22 and $26 during 2012 and 2011, respectively.

The following tables summarize information regarding restricted stock outstanding at March 31, 2012 and 2011 including activity during the three months then ended.

				Weighted
				Average
	Shares			Grant Price
January 1, 2011		18,530		$	16.46
Restricted stock granted		8,695			23.00
Restricted stock legally vested		(2,867	)		(17.45	)
March 31, 2011		24,358		$	18.68
January 1, 2012		24,358		$	18.68
Restricted stock granted		8,473			23.60
Restricted stock legally vested		(3,865	)		(16.88	)
March 31, 2012		28,966		$	20.36

Scheduled compensation expense per calendar year assuming all restricted shares eventually vest to employees would be as follows:

2012	$	105
2013		125
2014		125
2015		95
2016		80
Thereafter		40
Totals	$	570