9. Share Based Compensation

We maintain share based payment plans that include a non-employee director stock purchase plan and a long-term incentive plan that permits the issuance of share based compensation, including stock options and non-vested share awards. The long-term incentive plan, which is shareholder approved, permits the grant of additional share based awards for up to 0.4 million shares of common stock as of June 30, 2014. The non-employee director stock purchase plan permits the issuance of additional share based payments for up to 0.2 million shares of common stock as of June 30, 2014. Share based awards and payments are measured at fair value at the date of grant and are expensed over the requisite service period. Common shares issued upon exercise of stock options come from currently authorized but unissued shares.

During the first quarter of 2014, pursuant to our long-term incentive plan, we granted 0.07 million shares of restricted stock and 0.03 million performance stock units (“PSU's”) to certain officers. The shares of restricted stock vest ratably over three years and the PSUs cliff vest after a period of three years. The performance feature of the PSUs is based on a comparison of our total shareholder return over the three year period starting on the grant date to the total shareholder return over that period for a banking index of our peers.

During the second quarter of 2013, we issued 0.1 million restricted stock units to six of our executive officers. These restricted stock units do not vest for a minimum of three years. Also, during the second quarter of 2013, pursuant to our long-term incentive plan we granted 0.1 million stock options to certain officers, none of whom is a named executive officer. The stock options have an exercise price equal to the market value on the date of grant, vest ratably over a three year period and expire 10 years from date of grant. We use the Black Scholes option pricing model to measure compensation cost for stock options. We also estimate expected forfeitures over the vesting period.

Our directors may elect to receive at least a portion of their quarterly cash retainer fees in the form of common stock (either on a current basis or on a deferred basis) pursuant to the non-employee director stock purchase plan referenced above. Shares equal in value to that portion of each director’s fees that he or she has elected to receive in stock are issued each quarter and vest immediately. We issued 0.007 million shares and 0.034 million shares to directors during the first six months of 2014 and 2013, respectively, and expensed their value during those same periods.

During 2013 a portion of our president’s annual salary was paid in the form of common stock. The annual amount paid in common stock (also referred to as “salary stock”) was $0.020 million for 2013.

Total compensation expense recognized for grants pursuant to our long-term incentive plan was $0.3 million and $0.5 million during the three and six month periods ended June 30, 2014, respectively, and was $0.1 million and $0.3 million during the same periods in 2013, respectively. The corresponding tax benefit relating to this expense was $0.1 million and $0.2 million for the three and six month periods ended June 30, 2014, respectively and zero for each period during 2013. Total expense recognized for non-employee director share based payments was $0.05 million and $0.09 million during the three and six month periods ended June 30, 2014, respectively, and was $0.09 million and $0.17 million during the same periods in 2013, respectively. The corresponding tax benefit relating to this expense was $0.02 million and $0.03 million for the three and six month periods ended June 30, 2014, respectively and zero for each period during 2013.

At June 30, 2014, the total expected compensation cost related to non-vested stock options, restricted stock, PSUs and restricted stock unit awards not yet recognized was $2.0 million. The weighted-average period over which this amount will be recognized is 2.2 years.

A summary of outstanding stock option grants and related transactions follows:

						Weighted-
						Average
				Average		Remaining		Aggregated
	Number of			Exercise		Contractual		Intrinsic
	Shares			Price		Term (Years)		Value
								(In thousands)
Outstanding at January 1, 2014		320,300		$	4.52
Granted		-
Exercised		(11,241	)		3.23
Forfeited		(4,401	)		5.17
Expired		(284	)		3.46
Outstanding at June 30, 2014		304,374		$	4.56		7.60	$	2,610

Vested and expected to vest at June 30, 2014		296,442		$	4.55		7.57	$	2,541
Exercisable at June 30, 2014		184,525		$	4.77		7.02	$	1,576

A summary of outstanding non-vested restricted stock, restricted stock units and PSUs and related transactions follows:

				Weighted-
				Average
	Number			Grant Date
	of Shares			Fair Value
Outstanding at January 1, 2014		303,980		$	3.77
Granted		102,561			13.84
Vested		-
Forfeited		(1,292	)		12.78
Outstanding at June 30, 2014		405,249		$	6.29

Certain information regarding options exercised during the periods follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
	(In thousands)
Intrinsic value	$	93	$	6	$	108	$	21
Cash proceeds received	$	26	$	2	$	36	$	13
Tax benefit realized	$	32	$	-	$	37	$	-