Stock-based Compensation

3 Months Ended

Mar. 31, 2013

Stock-based Compensation [Abstract]

Stock-based Compensation

Note 11 – Stock-based Compensation

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 March 31, 2013, on an adjusted basis, awards for stock options totaling 123,906 shares and awards for restricted stock totaling 48,134 shares of Company common stock have been granted, net of any forfeitures, to participants in the Plan. During the three months ended March 31, 2013 and 2012, share-based compensation expense totaled $43,000 and $33,000, 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 March 31, 2013:

	Shares		Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term In Years		Aggregate Intrinsic Value
Outstanding at the beginning of the year		123,906	$	8.94		6.33	$	180,903
Granted		-		-
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at March 31, 2013		123,906	$	8.94		6.09	$	460,930
Exercisable		84,869	$	9.03		5.54	$	308,074
Expected to vest, assuming a 0% forfeiture rate over the vesting term		123,906	$	8.94		6.09	$	460,930

As of March 31, 2013, there was $111,000 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 5.5 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.

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 during the three months ended March 31, 2013:

Non-vested Shares	Shares		Weighted-Average Grant-Date Fair Value Per Share		Aggregate Intrinsic Value Per Share
Non-vested at January 1, 2013		24,747	$	8.44
Granted		-
Vested		-
Forfeited		-
Expired		-
Non-vested at March 31, 2013		24,747	$	8.44	$	12.66
Expected to vest assuming a 0% forfeiture rate over the vesting term		24,747	$	8.44	$	12.66

The aggregate intrinsic value of the non-vested restricted stock options as of March 31, 2013 was $313,000.

As of March 31, 2013, there was $82,000 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 2.0 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. At March 31, 2013, 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 March 31, 2013, 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 $2.6 million at March 31, 2013. ESOP compensation expense included in salaries and benefits was $76,000 and $25,000 for the three months ended March 31, 2013 and 2012, respectively.

Subsequent to quarter end, on April 30, 2013, the Company declared a quarterly cash dividend of $0.05 per common share, payable on May 28, 2013 to shareholders of record at the close of business May 13, 2013.