Note 6 - 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]

Note 6. Stock Based Compensation

The Company recorded stock based compensation expense of $41 thousand and $29 thousand for the years to date September 30, 2014 and 2013, respectively.

The Company has a 2005 Stock Option Plan (the Plan) pursuant to which the Board of Directors may grant stock options to directors, officers and employees. The Plan authorizes grants of options to purchase up to 550,000 shares of the Company’s authorized but unissued common stock. Under the fair value recognition provisions of relevant accounting guidance, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the requisite service period, which is the vesting period.

The Company uses the Black-Scholes option pricing model to determine the fair value of stock options. The fair value of the stock based payment awards is affected by the price of our stock and a number of financial assumptions and variables. These variables include the risk free interest rate, expected dividend rate, expected stock price volatility and the expected life of the options.  No options were granted during the nine months ended September 30, 2014 or 2013. All previously issued options were fully vested by the end of 2012, thus no compensation expense related to stock options was recorded in 2014 or 2013.

A summary of option activity under the 2005 stock option plan for the year to date September 30, 2014 is as follows:

	Options Outstanding			Weighted Average Exercise Price		Aggregate Intrinsic Value(1)		Weighted Average Contractual Term (years)
Balance at December 31, 2013		391,710		$	9.34
Granted		-			-
Exercised		-			-
Forfeited		(7,150	)		10.00
Balance at September 30, 2014		384,560		$	9.35	$	-		1.80
Exercisable at September 30, 2014		384,560		$	9.35	$	-		1.80

(1) The aggregate intrinsic value of a stock option in the table above represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) that would have been received by the option holders had all option holders exercised their options on September 30, 2014.

The Board of Directors adopted a Restricted Stock Plan (the Plan) in September 2009 whereby 120,000 shares of the Company’s authorized but unissued common stock was set aside to be granted by the Company’s Board of Directors at its discretion. The principal purpose of the Plan was to make shares available for issue to the executive officers of the Company and the Bank in payment of incentives earned under the Incentive Compensation Plan. 

The restrictions attached to stock issued under the Plan provide for vesting over a five-year period. During the first nine months of 2014, the Company issued 17,268 shares of stock under the Plan, and in the same period of 2013, the Company issued 7,781 shares of stock under the Plan. A summary of the activity for restricted stock awards for the periods indicated is presented below:

	For the nine months ended September 30, 2014					For the nine months ended September 30, 2013
	Shares			Weighted-Average Grant Date Fair Value		Shares			Weighted-Average Grant Date Fair Value
Nonvested at beginning of year		27,846		$	5.05		25,896		$	4.76
Granted		17,268			6.25		7,781			5.98
Vested		(7,387	)		5.23		(5,831	)		5.03
Cancelled		-			-		-			-
Nonvested at end of year		37,727		$	5.56		27,846		$	5.05

The remaining unamortized compensation expense for restricted stock was $174 thousand at September 30, 2014 and will be recognized over the next 4.4 years. All compensation expense for stock options has been recognized.