Note 17 - Equity Based Compensation

12 Months Ended

Dec. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

17.     Equity-Based Compensation

1997 Stock Compensation Plan

Stock option awards have been granted under the Palmetto Bancshares, Inc. 1997 Stock Compensation Plan (the “1997 Plan”). The 1997 Plan terminated in 2007 and no options have been granted under the 1997 Plan since then. However, the termination did not impact options previously granted under the 1997 Plan. All outstanding options expire at various dates through December 31, 2016 and all stock option awards granted have a five-year vesting term and an exercise period of 10 years. The Board of Directors determined the terms of the options on the grant date, and the option exercise price was at least 100% of the fair value of the Company’s common stock as of the grant date. Options granted to teammates were “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code, while options granted to individuals other than teammates were “nonqualified stock options” (i.e. options that are not “incentive stock options”).

The following table summarizes stock option activity for the 1997 Plan at the dates and for the periods indicated.

	Stock options outstanding			Weighted-average exercise price
Outstanding, December 31, 2010		30,003		$	91.72
Forfeited		(6,800	)		107.43
Expired		(4,500	)		60.00
Outstanding, December 31, 2011		18,703			93.65
Forfeited		(6,750	)		94.98
Outstanding, December 31, 2012		11,953			92.89
Expired		(5,503	)		80.00
Outstanding, December 31, 2013		6,450			103.89

The following table summarizes information regarding stock options under the 1997 Plan that were outstanding and exercisable at December 31, 2013.

			Options outstanding and exercisable
Range of exercise prices			Number of stock  options outstanding and exercisable	Weighted-average remaining contractual life (years)	Weighted- average exercise price
$93.20	to	$106.40	2,500	0.15	$	94.52
$109.20	to	$121.60	3,950	2.34		109.83
Total			6,450	1.49		103.89

At December 31, 2013 and 2012, the fair value of the Company’s common stock did not exceed the exercise price of any options outstanding and exercisable under the 1997 Plan and, therefore, the stock options had no intrinsic value.

2008 Restricted Stock Plan

Under the 2008 Restricted Stock Plan (the “2008 Plan”), 62,500 shares of common stock were reserved for issuance subject to its anti-dilution provisions. Forfeitures are returned to the available pool of common stock for future issuance. Generally, the recipient will have the right to receive dividends, if any, with respect to such shares of restricted stock, to vote such shares and to enjoy all other shareholder rights except that the Company will retain custody of the stock certificate, and the recipient may not sell, transfer, pledge or otherwise dispose of the restricted stock until the forfeiture restrictions have expired.

Prior to 2011, restricted stock granted to directors under the 2008 Plan generally had a five-year vesting period. Beginning in 2011, with the exception of annual retainer grants that vest immediately, restricted stock granted to directors under the 2008 Plan generally had a three-year vesting period designed to coincide with director service terms. Beginning in 2012, restricted stock awards to directors upon initial appointment and reelection to the Board of Directors continued to be granted with vesting periods to coincide with director service terms but were changed to require a director to purchase shares of the Company’s common stock on the open market to be eligible to receive a matching grant of restricted stock awards. The matching grants at initial appointment and reelection are capped at an economic value of $10 thousand.

Shares of restricted stock granted to teammates and directors under the 2008 Plan are subject to vesting provisions based on continuous employment and service for a specified time period following the date of grant as follows:

	Vesting Period
Issued to directors in connection with annual retainer	Immediate
Issued to directors in connection with election to the Board of Directors	Length of Board of Directors term (currently 3 years)
Issued to teammates (years)	5

The following table summarizes restricted stock activity at the dates and for the periods indicated.

	Shares of restricted stock			Weighted-average grant date fair value per share
Granted, net of forfeitures, December 31, 2010		15,186		$	96.89
Grants		17,033			10.40
Forfeited		(525	)		168.00
Granted, net of forfeitures, December 31, 2011		31,694			49.23
Grants		19,967			5.51
Forfeited		(350	)		168.00
Granted, net of forfeitures, December 31, 2012		51,311			31.41
Grants		11,073			9.68
Granted, net of forfeitures, December 31, 2013		62,384			27.55
Remaining shares available for grant, December 31, 2013		116

During 2013, 8,407 shares of restricted stock with a total fair value of $70 thousand were granted to individuals other than management members of the Board of Directors as compensation for their annual Board of Directors retainers.

Under the director compensation program, during 2013, a total of 2,666 shares of restricted stock were awarded to directors who were re-elected to the Board of Directors at the Annual Meeting of Shareholders on May 16, 2013 and who purchased shares in accordance with the matching program.

Of the 62,384 net restricted stock awards granted under the 2008 Plan, the following table summarizes vesting status and activity at the dates and for the period indicated.

	Shares of restricted stock
Nonvested, December 31, 2012		13,915
Grants		11,073
Vested		(13,743	)
Nonvested, December 31, 2013		11,245

The weighted-average grant date fair value of restricted stock awards that vested during the year ended December 31, 2013 was $23.83 per share. The fair value of shares vested during the year ended December 31, 2013 based on vesting date fair value totaled $141 thousand.

2011 Stock Incentive Plan

The 2011 Stock Incentive Plan, as amended (the “2011 Plan”), was originally approved by shareholders at the 2011 Annual Meeting of Shareholders and allows the Board of Directors to grant a total of 700,000 stock options and/or restricted stock awards to teammates and directors. The 2011 Plan requires that stock options be issued with an exercise price at or above the fair market value per share of the Company’s common stock on the date of grant.

Under the 2011 Plan, the Board of Directors, at its discretion, determines the amount of equity awards to be granted, vesting conditions, type of award and any other terms and conditions. No options are exercisable more than 10 years after the date of grant. Generally, the recipient will have the right to receive dividends, if any, with respect to any shares of restricted stock granted, to vote such shares and to enjoy all other shareholder rights, except that the Company will retain custody of the stock certificate, and the recipient may not sell, transfer, pledge or otherwise dispose of the restricted stock until the forfeiture restrictions have expired. Forfeitures of restricted stock are returned to the available pool of common stock for future issuance.

The following table summarizes the 2011 Plan stock option and restricted stock information at the dates and for the periods indicated.

	Total shares			Stock options outstanding			Weighted-average exercise price per share		Shares of restricted stock			Weighted-average grant date fair value per share
2011 Grants		473,002			383,251		$	10.51		89,751		$	10.48
2012 Grants		8,020			-			-		8,020			6.50
2013 Grants		8,811			-			-		8,811			13.70
2013 Forfeitures		(575	)		-			-		(575	)		13.95
2013 Exercises					(11,250	)		11.00		-			-
Granted, net of forfeitures, December 31, 2013		489,258								106,007			10.43
Outstanding, December 31, 2013					372,001			10.50
Shares available for grant		700,000
Remaining shares available for grant, December 31, 2013		210,742

The 2011 grants were made subject to time vesting restrictions that begin in 2014 and performance requirements including termination of the Bank’s Consent Order with the Supervisory Authorities and two consecutive quarters of net income. At December 31, 2012, the quarterly net income vesting condition was met, and the Consent Order was terminated on January 30, 2013. Therefore, the performance requirements are fully satisfied. Except for 11,250 stock options and 2,500 shares of restricted stock that vested in 2013 based on the time vesting restrictions, the awards will vest from 2014 to 2016.

During 2012, 8,020 shares of restricted stock were awarded to certain teammates in recognition of performance. These awards are subject to the same time and performance conditions described above and, assuming the time vesting conditions are met, will vest from 2015 to 2017.

During 2013, 8,811 shares of restricted stock were awarded to certain teammates in recognition of performance and upon initial employment. These awards are subject to time vesting conditions and, assuming the time vesting conditions are met, will vest from 2014 to 2016.

Of the 106,582 restricted stock awards granted under the 2011 Plan, the following table summarizes the vesting status activity at the dates and for the period indicated.

	Shares of restricted stock
Nonvested, December 31, 2012		97,771
Grants		8,811
Forfeited		(575	)
Vested		(2,500	)
Nonvested, December 31, 2013		103,507

The weighted-average grant date fair value of restricted stock awards that vested during the year ended December 31, 2013 was $11.00 per share. The value of shares vested during the year ended December 31, 2013 based on vesting date fair value totaled $33 thousand.

The following table summarizes information regarding stock options under the 2011 Plan that were outstanding at December 31, 2013. None of the stock options outstanding under the 2011 Plan were exercisable at December 31, 2013.

	Options outstanding
Exercise price	Number of stock options		Weighted-average remaining contractual life (years)		Weighted-average exercise price		Value of outstanding in-the-money stock options
$10.40		312,501		7.38	$	10.40	$	800,003
$11.00		59,500		7.54		11.00		116,620
Total		372,001		7.40		10.50	$	916,623

Determining Fair Value. The following table summarizes the fair value of each stock option award granted under the 2011 Plan as estimated on the date of grant using the Black-Scholes option-pricing model and the weighted-average assumptions used for the determination of fair value of such grants.

	May 16, 2011 grants			June 16, 2011 grants			October 20, 2011 grant
Option exercise price, per share	$	10.40		$	11.00		$	11.00
Fair value of stock option awards granted, per share	$	5.16		$	5.40		$	3.10
Expected dividend yield		-	%		-	%		-	%
Expected volatility		45			45			45
Risk-free interest rate		2.51			2.22			1.45
Contractual term (years)		10			10			10
Expected term (years)		7			7			7
Vesting period (years)		5			5			5

Compensation Expense Relating to Equity-Based Compensation

The Company measures compensation expense for restricted stock and stock option awards at fair value and recognizes compensation expense in the Consolidated Statements of Income (Loss) over the service period for grants that have time / service-based vesting provisions. The fair value of restricted stock is determined based on the fair value of the common stock at the time of the grant. The grant date fair value of stock options granted is estimated using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model estimates the fair value of a stock option based on inputs and assumptions such as the expected volatility of the Company’s stock price, option exercise price, the level of risk-free interest rates, dividend yields and expected option term.

The following table summarizes compensation expense for the 1997 Plan, 2008 Plan and the 2011 Plan charged against pretax income (loss) for the periods indicated (in thousands).

	For the years ended December 31,
	2013		2012		2011
Compensation expense
1997 Plan	$	-	$	-	$	1
2008 Plan		336		343		360
2011 Plan		822		766		461
Total compensation expense	$	1,158	$	1,109	$	822
Income tax benefit	$	-	$	-	$	-

At December 31, 2013, based on equity awards outstanding at that time, the total unrecognized pretax compensation expense related to unvested equity awards granted under the 2008 Plan and 2011 Plan was $133 thousand and $1.0 million, respectively. This expense is expected to be recognized through 2016 under the 2008 Plan and 2017 under the 2011 Plan.