10. STOCK-BASED COMPENSATION

6 Months Ended

Jun. 30, 2014

Schedule of Compensation Related Costs, Share Based Payments (Tables)

STOCK-BASED COMPENSATION

Stock Option Plans

At June 30, 2014, the Company had two shareholder approved stock-based compensation plans: the 1998 Employee Stock Incentive Plan and the 2008 Stock Incentive Plan. A total of 733,793 shares were authorized under all plans at June 30, 2014. The plans do not provide for the settlement of awards in cash and new shares are issued upon exercise of the options. The North Valley Bancorp 1998 Employee Stock Incentive Plan provides for awards in the form of options (which may constitute incentive stock options (“ISOs”) or non-statutory stock options (“NSOs”) to key employees) and also provides for the award of shares of Common Stock to outside directors. As provided in the 1998 Employee Stock Incentive Plan, the authorization to award incentive stock options terminated on February 19, 2008. Pursuant to the 1998 Employee Stock Incentive Plan there were outstanding options to purchase 47,068 shares of Common Stock at June 30, 2014. The North Valley Bancorp 2008 Stock Incentive Plan was adopted by the Company’s Board of Directors on February 27, 2008, effective that date, and was approved by the Company’s shareholders at the annual meeting, May 22, 2008. The terms of the 2008 Stock Incentive Plan are substantially the same as the North Valley Bancorp 1998 Employee Stock Incentive Plan. The 2008 Stock Incentive Plan provides for the grant to key employees of stock options, which may consist of NSOs and ISOs. Under the 2008 Stock Incentive Plan, options may not be granted at a price less than the fair value at the date of the grant. Under all plans, options may be exercised over a ten year term. The vesting period is generally four years; however the vesting period can be modified at the discretion of the Company’s Board of Directors, and for all options granted after the fourth quarter in 2008 the vesting period is five years. The 2008 Stock Incentive Plan also provides for the grant to outside directors, and to consultants and advisers to the Company, of stock options, all of which must be NSOs. The shares of Common Stock authorized to be granted as options under the 2008 Stock Incentive Plan consist 686,725 shares of Common Stock reserved for issuance under the terms of the 2008 Stock Incentive Plan, consisting of 302,553 shares to be issued upon the exercise of options granted and still outstanding as of that date, 5,580 shares issued as stock awards and 378,592 shares reserved for future stock option grants and director stock awards at June 30, 2014. Effective January 1, 2009, and on each January 1 thereafter for the remaining term of the 2008 Stock Incentive Plan, the aggregate number of shares of Common Stock which are reserved for issuance pursuant to options granted under the terms of the 2008 Stock Incentive Plan shall be increased by a number of shares of Common Stock equal to 2% of the total number of the shares of Common Stock of the Company outstanding at the end of the most recently concluded calendar year. Any shares of Common Stock that have been reserved but not issued as options during any calendar year shall remain available for grant during any subsequent calendar year. Outstanding options under the plans are exercisable until their expiration. Each outside director of the Company shall also be eligible to receive a stock award of 180 shares of Common Stock as part of his or her annual retainer paid by the Company for his or her services as a director. The number of shares of Common Stock available as stock awards to outside directors shall equal the number of shares of Common Stock to be awarded to such outside directors.

Stock-based Compensation

There were no options granted in the three and six month periods ended June 30, 2014. There were no options granted in the three month period ended June 30, 2013. There were 114,234 options granted for the six month period ended June 30, 2013. For the three month period ended June 30, 2014 and 2013, the compensation cost recognized for share based compensation was $98,000 and $108,000, respectively. For the six month period ended June 30, 2014 and 2013, the compensation cost recognized for share based compensation was $196,000 and $191,000, respectively. At June 30, 2014, the total unrecognized compensation cost related to stock-based awards granted to employees under the Company’s stock option plans was $1,208,000. This cost is expected to be amortized on a straight-line basis over a weighted average period of approximately 3.2 years and will be adjusted for subsequent changes in estimated forfeitures. The following table summarizes the weighted average grant date fair value of options granted for the three and six month periods ended June 30, 2014 and 2013, based on the following assumptions used in a Black-Scholes Merton model.

	For three months ended June 30,				For six months ended June 30,
	2014		2013		2014		2013
Weighted average grant date fair value per share of options granted		N/A		N/A		N/A	$	9.53
Significant weighted average assumptions used in calculating fair value:
Expected term		N/A		N/A		N/A		6.32 years
Expected annual volatility		N/A		N/A		N/A		60	%
Expected annual dividend yield		N/A		N/A		N/A		N/A
Risk-free interest rate		N/A		N/A		N/A		1.38	%

A summary of outstanding stock options follows:

						Weighted
				Weighted		Average
				Average		Remaining		Exercise		Aggregate
				Exercise		Contractual		Price		Intrinsic
	Shares			Price		Term		Range		Value ($000)
Outstanding at January 1, 2014		354,710		$	24.55		8 years		$9.97-$103.10	$	2,151
Granted		—			—
Exercised		—			—
Expired or Forfeited		(5,089	)		75.76
Outstanding at June 30, 2014		349,621		$	23.80		7 years		$9.97-$103.10	$	2,151
Fully vested and exercisable at June 30, 2014		172,485		$	33.98		5 years		$9.97-$103.10	$	753
Options expected to vest at June 30, 2014		177,136		$	13.89		8 years		$9.97-$16.80	$	1,399

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock as of June 30, 2014. There were no options exercised during the three and six month periods ended June 30, 2014 and 2013.