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, 2013, 3,411 stock options were vested and 1,666 options were granted resulting in 2,757 unvested options at December 31, 2013. There was no intrinsic value of option grants in 2013 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 2013 was $7.55 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 101.70%; risk-free interest rate of 1.00%; and expected life of 7 years. There were no options exercised during the year ended December 31, 2013. During the year ended December 31, 2012, 4,033 stock options were vested and 1,166 options were granted resulting in 4,500 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 $8.07 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 seven years. There were no options exercised during the year ended December 31, 2012. There were no options granted or exercised during the year ended December 31, 2011. Total options outstanding at December 31, 2013 and 2012 were 51,673 and 83,203, respectively.

The following table presents certain option information for the year ended December 31, 2013:



	Outstanding Options				Exercisable Options
	Number of options		Weighted-average exercise price		Number of options		Weighted-average exercise price
At December 31, 2012	83,203		$	40.47	78,701		$	41.40
Options authorized	—		—		—		—
Options granted/vested	1,666		9.12		3,411		27.14
Options exercised	—		—		—		—
Options expired	(22,486	)	43.78		(22,486	)	43.78
Options forfeited	(10,710	)	40.55		(10,710	)	40.55
At December 31, 2013	51,673				48,916

At December 31, 2013, the weighted-average remaining contractual life of outstanding and exercisable options was 3.3 years and 3.1 years, respectively. At December 31, 2012, the weighted average remaining contractual life of outstanding and exercisable options was 2.9 years and 2.6 years, respectively.

The following table segregates the shares outstanding at December 31, 2013 into meaningful ranges:



Shares	Option Price per share ($)	Weighted-average remaining contractual life (years)	Weighted-average exercise price ($)	Shares excercisable December 31, 2013
4,498	9.12-11.52	7.81	10.18	2,275
2,666	20.37-20.70	5.52	20.49	2,132
6,384	28.20-31.38	4.05	29.90	6,384
1,015	34.68-35.97	3.05	35.07	1,015
12,482	38.37-41.73	2.14	41.42	12,482
23,795	42.00-46.95	2.67	45.00	23,795
833	57.21	3.05	57.21	833
51,673				48,916

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

As of December 31, 2013, there are 211,159 restricted shares outstanding, of which 34,316 shares of restricted stock are vested and 176,843 shares are nonvested. There were 3,242 shares of restricted stock issued during the year ended December 31, 2013 at an average fair value of $12.65, and no restricted shares were forfeited.

As of December 31, 2012, there were 207,917 restricted shares outstanding, of which 14,549 shares of restricted stock were vested and 235,118 shares were nonvested. There were 169,143 shares of restricted stock issued during the year ended December 31, 2012 at an average fair value of $6.96, and 15,554 restricted shares were forfeited. Of the restricted shares issued in 2012, 163,328 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 48,329 shares of restricted stock granted at an average fair value of $7.02 per share. The fair value of each share grant is based on the closing market price of the stock on the date of issuance.

There are 315,998 shares of common stock available for future grant of restricted stock and stock options under the Company's 2008 Omnibus Stock Ownership and Long Term Incentive Plan (the "Omnibus Plan") and the 2013 Equity Incentive Plan (the "2013 Equity Plan").

The compensation expense related to options and restricted shares was $21,882 and $480,249, respectively, for the year ended December 31, 2013, respectively. The compensation expense related to options and restricted shares was $31,621 and $388,187 for the year period ended December 31, 2012, respectively. Compensation expense related to options and restricted shares was $76,903 and $133,071 for the year ended December 31, 2011, respectively. As of December 31, 2013, there was $544,896 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 1.3 years.