Employee Benefits

12 Months Ended

Dec. 31, 2012

Employee Benefits [Abstract]

Employee Benefits

Note 14 – Employee Benefits

The Company has a 401(k) pension plan that allows employees to defer a portion of their salary into the 401(k) plan.  The Company matches a portion of employees' salary deferrals.  Pension costs are accrued and funded on a current basis.  The Company contributed $19,000 and $68,000 to the plan for the years ended December 31, 2012 and 2011, respectively.

The Company also offers a deferred compensation plan for designated senior managers, which provides benefits payable at age 65.  Under certain circumstances, benefits are payable to designated beneficiaries.  Contributions to the plan are discretionary, and monies set aside to fund the plan are currently held in certificate of deposit accounts at the Company and at December 31, 2012 and 2011 approximated $108,000 and $141,000, respectively.  The Company made no contributions to the plan for the year ended December 31, 2012 and a $20,000 contribution to the plan for the year ended December 31, 2011.

Effective in 2007, the board of directors adopted a supplemental executive retirement plan (SERP) to provide certain members of senior management with additional retirement income.  These payments are subject to a non-compete clause.  The SERP is an unfunded, non-contributory defined benefit plan evidenced by an Executive Long Term Compensation Agreement ("Agreement") between the recipients and the Company.  The SERP is subject to a vesting schedule and payments do not begin until after retirement. The SERP provides for earlier payments in the event of death or disability. In the event of an involuntary termination without cause or a change in control of the Company, the recipients are entitled immediately to the accrued liability under the SERP (with any applicable cutback for payments after a change in control as required by Section 280(G) of the Internal Revenue Code). As of December 31, 2012 and 2011, the accrued liability for the SERP was $571,000 and $403,000, respectively, and is included in other liabilities on the consolidated balance sheets.  The expense was $168,000 for the year ended December 31, 2012 and a reduction of expense of $149,000 was recognized for the year ended December 31, 2011.

Stock Options and Restricted Stock

In 2008, the Board of Directors adopted and stockholders approved an Equity Incentive Plan (the "Plan") which was assumed by the Company in connection with the Conversion.  The Plan permits the grant of restricted stock, restricted stock units, stock options, and stock appreciation rights.  Under the Plan, 126,287 shares of common stock were approved for awards for stock options and stock appreciation rights and 50,514 shares of common stock were approved for awards for restricted stock and restricted stock units, in each case, as adjusted for the Conversion exchange ratio.

As of December 31, 2012, on an adjusted basis, awards for stock options totaling 123,906 shares and awards for restricted stock totaling 24,747 shares of Company common stock have been granted, net of any forfeitures, to participants in the Plan.  During the years ended December 31, 2012 and 2011, share-based compensation expense totaled $163,000 and $132,000, respectively.  All of the awards vest in 20 percent annual increments commencing one year from the grant date.  The options are exercisable for a period of 10 years from the date of grant, subject to vesting.

The following is a summary of the Company's stock option plan awards during the period ended December 31, 2012: 

	Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term In Years		Aggregate Intrinsic Value
	(all figures shown as actual)
Outstanding at the beginning of the year		97,492	$	9.07		6.57	$	-
Granted		26,414		8.94		6.33
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at December 31, 2012		123,906	$	8.94		6.33	$	180,903
Exercisable		61,682	$	9.07		5.56	$	82,037
Expected to vest, assuming a 0% forfeiture rate over the vesting term		123,906	$	8.94		6.33	$	180,903

As of December 31, 2012, there was $134,000 of total unrecognized compensation cost related to non-vested stock options granted under the Plan.  The cost is expected to be recognized over the remaining weighted-average vesting period of 2.1 years.

The fair value of each option award is estimated on the date of grant using a Black-Scholes model that uses the assumptions noted in the table below.  The dividend yield is based on the current quarterly dividend in effect at the time of the grant.  

The Company (including the predecessor entity) became a publicly held company in January 2008, so the amount of historical stock price information available is limited. As a result, the Company elected to use a weighted-average of its peers' historical stock prices, as well as the Company's own historical stock prices to estimate volatility. The Company bases the risk-free interest rate on the U.S. Treasury Constant Maturity Indices in effect on the date of the grant. The Company elected to use the Staff Accounting Bulletin No. 110, "Share-Based Payments" permitted by the Securities and Exchange Commission to calculate the expected term. This simplified method uses the vesting term of an option along with the contractual term, setting the expected life at a midpoint in between.

The fair value of options granted during 2012 was determined using the following weighted-average assumptions as of the grant date.

Annual dividend yield		0.00	%
Expected volatility		28.97	%
Risk-free interest rate		1.46	%
Expected term		7.5 years
Weighted-average grant date fair value per option granted	$	2.94

The fair value of the restricted stock awards is equal to the fair value of the Company's stock at the date of grant. Compensation expense is recognized over the vesting period that the awards are based. Shares awarded as restricted stock vest ratably over a five-year period beginning at the grant date with 20% vesting on the anniversary date of each grant date.

Restricted Stock Awards

The fair value of the restricted stock awards is equal to the fair value of the Company's stock at the date of grant.  Compensation expense is recognized over the vesting period that the awards are based. Shares awarded as restricted stock vest ratably over a five-year period beginning at the grant date with 20% vesting on the anniversary date of each grant date. 

The following is a summary of the Company's non-vested restricted stock awards for the year ended December 31, 2012:

Non-vested Shares	Shares			Weighted-Average Grant-Date Fair Value Per Share		Aggregate Intrinsic Value Per Share
	(all figures shown as actual)
Non-vested at January 1, 2012		22,706		$	8.41
Granted		9,607		$	8.48
Vested		(7,566	)	$	8.41
Forfeited		-
Expired		-			-
Non-vested at December 31, 2012		24,747		$	8.44	$	10.40
Expected to vest assuming a 0% forfeiture rate over the vesting term		24,747		$	8.44	$	10.40

The aggregate intrinsic value of the non-vested restricted stock options as of December 31, 2012 was $257,000.

As of December 31, 2012, there was $101,000 of unrecognized compensation cost related to non-vested restricted stock granted under the Plan remaining.  The cost is expected to be recognized over the weighted-average vesting period of 2.1 years.

Employee Stock Ownership Plan

In January 2008, the ESOP borrowed $1.2 million from the Company to purchase common stock of the Company.  In August 2012, in conjunction with the Conversion, the ESOP borrowed an additional $1.1 million from the Company to purchase common stock of the Company.  Both loans are being repaid principally by the Bank through contributions to the ESOP over a period of ten years.  The interest rate on the loans is fixed at 4.0% and 2.25%, per annum, respectively.  As of December 31, 2012, the remaining balances of the ESOP loans were $638,000 and $1.0 million, respectively.

Neither the loan balances nor the related interest expense are reflected on the condensed consolidated financial statements.

At December 31, 2012, the ESOP was committed to release 21,443 shares of the Company's common stock to participants and held 152,572 unallocated shares remaining to be released in future years.  The fair value of the 202,755 restricted shares held by the ESOP trust was $2.1 million at December 31, 2012.  ESOP compensation expense included in salaries and benefits was $216,000 and $85,000 for the years ended December 31, 2012 and 2011, respectively.