Stock Options and Restricted Stock

12 Months Ended

Dec. 31, 2012

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

Stock Options and Restricted Stock

STOCK OPTIONS AND RESTRICTED STOCK

The Company has stock option plans for directors, selected executive officers and other key employees. The plans provide for the granting of options to purchase shares of the Company’s common stock at a price not less than the fair market value at the date of grant of the option. Option exercise prices are established at market value on the grant date. Vesting schedules are determined by the Board of Directors. Upon termination, unexercised options held by employees are forfeited and made available for future grants.

During the year ended December 31, 2012, 12,100 stock options were vested and 3,500 options were granted resulting in 13,500 unvested options at December 31, 2012. There was no intrinsic value of option grants in 2012 since options are granted at the market price of the stock on date of grant. The weighted average fair value of the options granted in 2012 were $2.69 and was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions: dividend yield of 0.00%; expected volatility of 100.62%; risk-free interest rate of 1.26%; and expected life of 7 years. There were no options exercised during the year ended December 31, 2012. There were no options granted or exercised during the years ended December 31, 2011 and December 31, 2010.

At December 31, 2012, there were 13,500 options unvested and no shares available for grants of options other than shares available under the Company's 2008 Omnibus Stock Ownership and Long Term Incentive Plan (the "Omnibus Plan"). Total options outstanding at December 31, 2012 were 249,667.

The following table presents certain option information for the year ended December 31, 2012:

			Outstanding Options				Exercisable Options
	Shares available for future grants		Number of options		Weighted-average exercise price		Number of options		Weighted-average exercise price
At December 31, 2011	197,862		277,195		$	13.65	255,095		$	13.83
Options authorized	—		—		—		—		—
Options granted/vested	(3,500	)	3,500		3.26		12,100		12.97
Options exercised	—		—		—		—		—
Options expired	(4,751	)	(4,751	)	7.45		(4,751	)	7.45
Options forfeited	26,277		(26,277	)	14.9		(26,277	)	14.9
At December 31, 2012	215,888		249,667				236,167		$	13.83

At December 31, 2012, the weighted-average remaining contractual life of outstanding and exercisable options was 2.9 years and 2.6 years, respectively. At December 31, 2011, the weighted average remaining contractual life of outstanding and exercisable options was 3.8 years and 3.6 years, respectively.

There was no aggregate intrinsic value of options outstanding and exercisable at December 31, 2012 and December 31, 2011, since the exercise price of options outstanding exceeded the market share price of $2.94 and $1.61, respectively, at year end. The following table segregates the shares outstanding at December 31, 2012 into meaningful ranges:

Shares	Option Price per share	Weighted-average remaining contractual life (years)	Weighted-average exercise price	Shares excercisable December 31, 2012
8,500	3.26-3.84	8.12	$3.60	3,000
8,000	6.79-6.90	6.52	6.83	4,800
28,106	9.31-10.46	3.74	9.81	28,106
45,552	11.56-13.86	2.49	13.63	45,552
157,009	13.91-15.65	2.33	14.90	152,209
2,500	19.07	4.05	19.07	2,500
249,667				236,167

All options expire ten years after date of grant and are made available for future grants at expiration.

As of December 31, 2012, there are 623,782 restricted shares outstanding, of which 43,663 shares of restricted stock are vested and 580,119 shares are nonvested. There were 507,450 shares of restricted stock issued during the year ended December 31, 2012 at an average fair value of $2.32, and 46,668 restricted shares were forfeited.

Of the 507,450 shares issued during 2012, 490,000 were issued with performance and service conditions. Vesting of these shares are based on achieving certain earnings per share and credit performance standards and require a minimum of 2-years of service. Shares issued with performance conditions are granted at-the-money, and contingently vest over a period of 1 to 3 years. The fair value of the shares granted with performance conditions was estimated on the date of grant and assumes that performance goals will be achieved. Restricted shares with performance and service conditions have been recognized based on the assumption that performance thresholds will be met. Year one performance conditions were met in 2012, and it is highly probable that year two performance conditions will also be met; although service conditions still need to be completed for the shares to be fully vested. Compensation cost is recognized only for those awards that ultimately vest.

During the year ended December 31, 2011, there were 145,000 shares of restricted stock granted at an average fair value of $2.34 per share. The fair value of each share grant is based on the closing market price of the stock on the date of issuance. In 2010, 18,000 shares of restricted stock were granted at a weighted average fair value of $4.18 per share. The fair value of each share grant is based on the closing market price of the stock on the date of issuance. Restricted shares vest over a three-year period. A total of 18,000 shares of restricted stock are nonvested as of December 31, 2010. There are 482,000 shares of restricted stock available for issuance as of December 31, 2010.

The compensation expense related to options and restricted shares was $31,621 and $388,187, respectively, for the year ended December 31, 2012, respectively. The compensation expense related to options and restricted shares was $76,903 and $133,071 for the year period ended December 31, 2011, respectively. As of December 31, 2012, there was $993,423 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under all of the Company's stock benefit plans. This cost is expected to be recognized over an average vesting period of 2.1 years.